Suppose the demand for pork is given by the equation
Q = p-0.5pc0.2
where pc is the price of chicken. Compute the cross-price elasticity of demand for pork
The partial derivative of quantity w.r.t to the price of chicken is:
∂Q/∂pc = 0.2p-0.5pc-0.8
The cross-price elasticity is then
E = 0.2p-0.5pc- 0.8 ? pc/(p-0.5pc0.2 ) = 0.2
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