Suppose the cross-price elasticity between demand for Chipotle burritos and the price of Qdoba burritos is 0.8. If Qdoba increases the price of its burritos by 10%: Chipotle will sell 8% more burritos. We cannot tell what will happen to Chipotle, but Qdoba will sell 8% fewer burritos. Chipotle will sell s8% fewer burritos. Chipotle will sell 10% more burritos.

Question

04-03-2020
Business

contestada

Suppose the cross-price elasticity between demand for Chipotle burritos and the price of Qdoba burritos is 0.8. If Qdoba increases the price of its burritos by 10%: Chipotle will sell 8% more burritos. We cannot tell what will happen to Chipotle, but Qdoba will sell 8% fewer burritos. Chipotle will sell s8% fewer burritos. Chipotle will sell 10% more burritos.

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ewomazinoade ewomazinoade · Answer 1 · 2020-03-04T04:54:45+01:00

Answer:

Chipotle will sell 8% more burritos.

Explanation:

Cross price elasticity of demand measures the responsiveness of quantity demanded of one good to changes in price of another good.

Cross price elasticity of demand = percentage change in quantity demanded of Chipotle burritos / percentage change in price of Qdoba burritos

0.8 = percentage change in quantity demanded of Chipotle burritos / 10%

Percentage change in quantity demanded = 0.8 × 10% = 8%

When the price of Qdoba burritos increases by 10%, the quantity demanded of Chipotle burritos rises by 8%. This is because both burritos are subsituite goods.

Substitute goods are goods that can be consumed in place of each other.

I hope my answer helps you