The price of cups increased from $3.75 to $4.05 and the quantity demanded of plates decreased from 4,950 to 4,450. Calculate the cross-price elasticity of demand for plates. Round your answer to the nearest hundredth.

Cross elasticity of demand = -1.25

Explanation:

Cross elasticity of demand= Per entage change in  quantity of commodity A (plates)/ Percentage change in price of commodity B(cups)

Percentage change in quantity demanded for plates = (New quantity - old quantity/ old quantity ) x 100

={ (4450-4950)/4950] ×100

=-500/4950

= - 0.10×100= - 10%

Percentage change in price of cups =(New price - old price/ old price) x 100 [(4.05-3.75)/3.75]×100

=0.3/ 3.75

= 0.08×100= 8%

Cross price elasticity of demand = - 10%/8%

= - 1.25

Here, the cross elasticity of demand for these  goods of cups and plates is negative(-1.25) showing that they are  complementary goods  since as the price for cups  increases, the demand for plates decreased.

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