Rising peanut prices have forced peanut butter makers to raise the price of a jar of peanut butter from $2 to $3 per jar, causing quantity demanded to fall. In addition, sales of jelly also dropped by 15%.
A. Using the midpoint method, what is the cross elasticity of demand between peanut butter and jelly? Round your calculation(s) to two decimal places.
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B. Based on your calculation for cross elasticity, peanut butter and jelly are best viewed as:
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Soon after the peanut butter price increase, makers of chocolate spread dropped the price from $4 to $3 per jar. This resulted in a further decline in peanut butter sales by 20%.
C. Using the midpoint method, what is the cross elasticity of demand between peanut butter and chocolate spread? (Round the final answer to two decimal places.)
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D. Based on your calculation for cross elasticity of demand, peanut butter and chocolate spread are best viewed as:
| A. |
| B. |
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