00:01
So in general, an elasticity is a measure of how much quantity responds, the percent change in quantity, to how much price moves, the percent change in price.
00:09
Price changes, how much does quantity respond? here, we have a cross -price elasticity between two goods, which is the same idea, just a special case.
00:21
Here, we're thinking about the percent change in the quantity of some good why with response to, the percent change in the price of good x, right? so we are working across two goods, right? that's why it's across price elasticity.
00:40
It's not how much the quantity of x responds to the price of x, it's how much the quantity of y responds to the price of x, two different goods.
00:49
Now, we're told that the quantity demanded is minus 2 .3%.
00:53
We're told that the change in the price is plus 1 .6%.
00:58
So the calculation here is pretty straightforward, and we can see immediately that it's going to be elastic because it's a number that's greater than one.
01:08
So the elasticity here is minus 1 .4375.
01:13
This tells us that we have an elastic relationship because the quantity is changing by more than the price, right? the change in the quantity swings by more than the price...