California National University for Advanced Studies Economics Questions
Question Description
I’m working on a economics question and need support to help me learn.
1. Assume that a department store was selling a brand of men’s dress shirt at $100.00 per shirt. At that price, the store sold 50 shirts in one week. Next week, the store declared a “sale – buy one get one free”. As a result, sale of the dress shirt increased to 300 in that week. Based on these information, calculate the price elasticity of demand using the arc elasticity formula (p 70-71 of the textbook). What does the coefficient of elasticity indicate?
3. Define cross-price elasticity of demand. Explain
how the sign of the coefficient of cross-price elasticity (positive or
negative) indicates if the two goods are substitute goods or
complementary goods.
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