Question

When the price of salad was $5 a cafeteria sold 50 packets of slad dressing a day at $.50 per packet. When they raised the price of salad to $7 but kept the dressing the

Answer 1

Answer: -1.25; compliments

Explanation:

Answer 2

-2, compliments

Explanation:

The computation of the cross elasticity of demand is shown below:

Given that

(P1, Q1) = (7, 25)

(P2, Q2) =(5,50)

Now here we use the mid-point formula for determining the cross price elasticity

= [(Q2 - Q1) ÷ (P2 - P1)} × [(P1 + P2) ÷ (Q1 + Q2)]

= [(50 - 25) ÷ (5 - 7)] × (5 + 7) ÷ [(25 + 50)]

= -2

Hence, the cross-price elasticity is -2

It is negative so these are complementary goods

Hence, the correct answer is -2, compliments