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jenyasd209 [6]
2 years ago
10

Using the midpoint method, find the cross-price elasticity of demand for FedEx and UPS overnight shipping if the price of FedEx

increased from $65 to $75 and the quantity demanded of UPS went up from 1.2 million packages per day to 1.3 million. Round to two decimal places as necessary.
Mathematics
1 answer:
IrinaK [193]2 years ago
6 0

Answer:

Cross price elasticity using midpoint method = 0.56

Step-by-step explanation:

Using the mid-point method

Cross-price Elasticity of Demand = <u>% change in Quantity demanded of UPS</u>

                                                          % change of price of FedEx

%change in Quantity demanded of UPS

using Mid-point method                          = <u> Q2-Q1           </u>  × 100

                                                                     (Q1+Q2)÷ 2

                                      = <u>1.3-1.2           </u>   × 100

                                        (1.2+1.3)÷2

                                     = <u>0.1      </u> × 100

                                       1.25

                                     = 8%

% change in price of FedEx

using midpoint method    =<u> P2-P1            </u>× 100

                                             (P1+P2)÷ 2

                                          =<u> 75-65           </u>× 100

                                            (65+75)÷2

                                          =<u> 10  </u>   × 100

                                             70

                                          = 14.28%

Cross-price Elasticity of Demand =  8% ÷ 14.28%

using midpoint method                = 0.56

             

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