Determine cross-elasticity.

Here's a breakdown of the cross-elasticity calculation shown in the image:

The Cross-Price Elasticity of Demand ($\epsilon_{xy}$) measures how responsive the quantity demanded of one good (Good X) is to a change in the price of another good (Good Y).

The formula for cross-elasticity is:

$$\epsilon_{xy} = \frac{\text{Percentage Change in Quantity Demanded of Good X}}{\text{Percentage Change in Price of Good Y}}$$

This can be expanded into the point elasticity formula:

$$\epsilon_{xy} = \frac{\Delta Q_x / Q_x}{\Delta P_y / P_y} = \frac{\Delta Q_x}{\Delta P_y} \times \frac{P_y}{Q_x}$$

Where:

• $\Delta Q_x$ is the change in quantity demanded of Good X (Tea).
• $Q_x$ is the initial quantity demanded of Good X (Tea).
• $\Delta P_y$ is the change in price of Good Y (Coffee).
• $P_y$ is the initial price of Good Y (Coffee).

Let's use the data from the table:

Good X (Tea):

• Initial Quantity ($Q_{x1}$) = 40
• Final Quantity ($Q_{x2}$) = 50

Good Y (Coffee):

• Initial Price ($P_{y1}$) = 0.40
• Final Price ($P_{y2}$) = 0.60