28/09/15
Lesson 3: Cross Elasticity of Demand
Learning Objective: I can define and calculate cross elasticity of demand.
DA: Define cross elasticity of demand.
XED is a measure of how much the demand of a product changes when there is a change in the price of another product.
DA: Define cross elasticity of demand.
XED is a measure of how much the demand of a product changes when there is a change in the price of another product.
Owners of a pizza stand find that when their competitor, hamburger stand, lowers the price of a burger from $2-$1.80, the number of pizza slices that they sell each weeks falls from 400-380.
Range values for XED
Why is this concept important for firms to understand? |
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Activity:
1.
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2. Super Ritz has increased the price of whole milk from $0.80-1.00, the weekly sales of low-fat milk increased from 25,000 gallons to 30,000 gallons.
2. Super Ritz has increased the price of whole milk from $0.80-1.00, the weekly sales of low-fat milk increased from 25,000 gallons to 30,000 gallons.
- Calculate the XED between whole milk and low-fat milk.
- Explain the relationship above in terms of XED.
3. Dunkin Donuts has estimated the XED between the following products:
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