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Number of ice creams sold Price of ice cream tub Price of a portion of chips Ave. Income
‘000
5 £12.00 £4 £19
18 £11.00 £3 £20
23 £10.00 £2 £21
64 £9.00 £1 £24
96 £8.50 £0.90 £29
182 £8.00 £0.80 £34
223 £7.79 £0.70 £39
268 £7.50 £0.60 £44

If the price of chips decreased from £0.90 to £0.70.
calculate the cross elasticity of demand for ice cream

Sagot :

Answer:

To calculate the cross elasticity of demand for ice cream when the price of chips decreased from £0.90 to £0.70, we need to use the formula for cross elasticity of demand.

The formula for cross elasticity of demand is:

Cross Elasticity of Demand = ((% Change in Quantity Demanded of Ice Cream) / (% Change in Price of Chips))

First, calculate the % change in quantity demanded of ice cream:

- Initial quantity of ice creams sold = 96 '000

- Final quantity of ice creams sold = 223 '000

% Change in Quantity Demanded of Ice Cream = ((Final Quantity - Initial Quantity) / Initial Quantity) * 100

Next, calculate the % change in the price of chips:

- Initial price of chips = £0.90

- Final price of chips = £0.70

% Change in Price of Chips = ((Final Price - Initial Price) / Initial Price) * 100

Finally, substitute these values into the formula and calculate the cross elasticity of demand for ice cream.

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The initial of the price of the chips is £90 but the total of the chip is £70
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