A manufacturer of espresso coffee machines increases the average retail price of its machines from £80 £80\,£80 to £100£100£100. Consequently, the weekly quantity demanded for compatible espresso pods falls from 40,000 40,000\,40,000 units to 32,000 32,000\,32,000 units.
Which of the following is the cross elasticity of demand (XED) between these two goods, and what relationship does it suggest?
−0.80-0.80−0.80, indicating they are complements
+0.80+0.80+0.80, indicating they are substitutes
−1.25-1.25−1.25, indicating they are complements
+1.25+1.25+1.25, indicating they are substitutes
119 exam-style questions on Edexcel A A Level Economics 1.2.3 Price, income and cross elasticities of demand. Each one has a worked solution and a mark scheme showing where the marks go.