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Author Question: What kind of elasticity is relevant when you are trying to figure out how a price cut by the burger ... (Read 41 times)

Beheh

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on: Jun 29, 2018
What kind of elasticity is relevant when you are trying to figure out how a price cut by the burger shop next door will affect the demand for your pizza? Explain.
 
  What will be an ideal response?

Question 2

Which of the following is NOT present in a perfectly competitive market?
 
  A) profit maximizing firms
  B) an economic profit in the long run
  C) price taking behavior
  D) identical products


HandsomeMarc

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The cross elasticity of demand is the relevant elasticity. It is a measure of the responsiveness of the demand for a good to a change in the price of a related good. In the case in question, the required elasticity is the cross elasticity of demand for pizza with respect to the price of a burger.

Answer to Question 2

B


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