ECON6000 Economic Principles And Decision Making Module 3 - Assessment 2

Problem B:

3. The Research Department of Schmeckt Gut has identified that a decline in the price of the Schmeckt Gut Energy Bar from $3.00 to $2.00 increases the quantity of our energy bars sold from 10 to 20 (thousand per month). At the same time, they identified that this decline in the price reduces the quantity of Fly High’s energy bars sold from 11 to 9 (thousand per month).

a. The Board asks you to calculate the cross-elasticity of demand for Fly High’s energy bars sold with respect to the price of our Schmeckt Gut Energy Bar.