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1.2.3 Price, income and cross elasticities of demand

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Question 24

A major video gaming platform increases its monthly subscription price from £12.00 to £15.00. In response, the monthly sales of a partner headset brand decrease from 8,000 units to 6,800 units.

Calculate the cross-elasticity of demand (XEDXEDXED) for the headsets with respect to the subscription price, and identify the economic relationship between these two goods.

XED=−0.6XED = -0.6XED=−0.6, indicating they are complements

XED=+0.6XED = +0.6XED=+0.6, indicating they are substitutes

XED=−1.67XED = -1.67XED=−1.67, indicating they are complements

XED=−0.6XED = -0.6XED=−0.6, indicating they are substitutes

1.2.3 Price, income and cross elasticities of demand Questions

  1. A Level
  2. /Economics
  3. /1.2.3 Price, income and cross elasticities of demand