Question

The amount of jelly sold decreases from 100 jars to 50 jars when the price of peanut butter increases from $2 to $3. Using the midpoint method, the cross-price elasticity between peanut butter and jelly is _____.

Answer 1

Answer: -1.7

Explanation:

Using a midpoint method. Find the rate of change for both quantity and price.

The rate of change in quantity is: ((Q2 - Q1)/(Q2+Q1)/2) X 100%

The rate of change in price is: ((P2-P1)/(P2+P1)/2)) X 100%

The answer is the rate of change in quantity divides by the rate of change in price.