Use the data in Problem 3 to work Problems 9 to 13 How does...

Name: Problem 11, Chapter 8: Economics
Uploaded: 2020-10-18T03:45:59-08:00
Duration: 6 min 40 s
Channel: Kanishk Mishra
Description: Use the data in Problem 3 to work Problems 9 to 13 How does Max's demand for snorkeling equipment change when the price of windsurfing equipment falls? What is Max's cross elasticity of demand for snorkeling with respect to the price of windsurfing? Are windsurfing and snorkeling substitutes or complements for Max?

Use the data in Problem 3 to work Problems 9 to 13 How does Max's demand for snorkeling equipment change when the price of windsurfing equipment falls? What is Max's cross elasticity of demand for snorkeling with respect to the price of windsurfing? Are windsurfing and snorkeling substitutes or complements for Max?

Use the data in Problem 3 to work Problems 9 to 13
How does Max's demand for snorkeling equipment change when the price of windsurfing equipment falls? What is Max's cross elasticity of demand for snorkeling with respect to the price of windsurfing? Are windsurfing and snorkeling substitutes or complements for Max?

Key Concepts

Substitute Goods

Substitute goods are products that serve similar or overlapping functions, where a change in the price of one influences the demand for the other in opposite directions. Specifically, if the price of one good falls and the demand for its substitute decreases, then the two goods are considered substitutes, as consumers tend to shift their preference to the less expensive option.

Complementary Goods

Complementary goods are items that are typically used together, so a change in the price of one can affect the demand for the other in the same direction. For instance, if a decrease in the price of one good leads to an increase in the demand for its complement, the two are considered complementary.

Cross Elasticity of Demand

Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It is calculated by dividing the percentage change in quantity demanded of the first good by the percentage change in the price of the second good. This concept helps determine whether the goods are substitutes or complements.

Transcript

00:01 Hello students in this video we will be discussing about cross elasticity of demand and how we can compute the cross elasticity of demand between two goods with the help of a certain data.

00:16 So let's start.

00:17 So the cross elasticity of demand is explained as a measure that measures a responsiveness in the quantity of one good.

00:28 Quantity of one good or one product in respect to price changes that takes place in another good second good let's say so cross elasticity of demand can be explained as a measure of responsiveness in the quantity demanded of one good when the change in the price of another good takes place and the more specifically cross elasticity of demand can be we explain as the percentage change in quantity demanded of a good in respect to quantity demanded in respect to the percentage change in price.

01:31 So, let's say there is a person m, he has a certain set of total utility of two goods and the cross -elasticity of demand of, let's say, equipment change.

01:43 Change of snorkelling with respect to let's snorkelling is i'm representing by s and the wind surfing i'm representing by w have been let's say taken and we have to compute the quantity change in snorkelling with respect to quantity percentage change in prices so let's understand this with the help of an example.

02:30 So, this is our data.

02:45 So from this hypothetical data we are taking, this is windsurfing, this is snorkeling, this is the total utility from windsurfing, this is total utility from snorkelling and the hours spend on snorkelling per day and this is same for the windsurfing per day.

03:06 And these are the hours.

03:08 This is the total utility from windsurfing...

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