Q1. When the price of ketchup rises by 15% the demand for hotdog falls by 1% calculate the cross -price elasticity of demand. Given the elasticity you calculated, did it make sense for supermarket to raise its price?
Q2. Assume that new entry decline your demand elasticity from - 2 to -3 (made demand more elastic). By how much be supposed to you adjust your price of $10? Use (P-MC)/P = 1/ l e l to calculate MC and then use the similar equation to discover out new price. l e l is the unlimited value of demand elasticity.