Final answer:
The estimated cross-price elasticity of demand for turkey with respect to the price of chicken is 1.
Step-by-step explanation:
The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, we are calculating the cross-price elasticity of demand for turkey with respect to the price of chicken. The formula for cross-price elasticity of demand is:
Cross-price elasticity of demand = % change in quantity demanded of turkey / % change in price of chicken
To calculate the % change in quantity demanded of turkey, we use the formula:
% change in quantity demanded = (New quantity - Original quantity) / Original quantity
Similarly, to calculate the % change in price of chicken, we use the formula:
% change in price = (New price - Original price) / Original price
Plugging in the given values, we have:
- % change in quantity demanded of turkey = (4,750 - 5,000) / 5,000 = -0.05 or -5%
- % change in price of chicken = ($1.90 - $2.00) / $2.00 = -0.05 or -5%
Substituting these values into the formula for cross-price elasticity of demand, we get:
Cross-price elasticity of demand = -0.05 / -0.05 = 1
Therefore, the estimated cross-price elasticity of demand for turkey with respect to the price of chicken is 1.