Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is a.-0.71, and X and Y are complements. b.-1.40, and X and Y are substitutes. C. -1.40, and X and Y are complements. d.-0.71, and X and Y are substitutes.

Option (a) is correct.

Explanation:

Given that,

Initial price of good X = $6

New price of good X = $4

Initial quantity demanded of good Y = 30 units

New quantity demanded of good Y = 40 units

Average price of good X:

= ($6 + $4) ÷ 2

= $10 ÷ 2

= $5

Average quantity demanded for good Y:

= (30 units + 40 units) ÷ 2

= 70 units ÷ 2

= 35

Cross-price elasticity of demand:

= (change in quantity demanded ÷ Average quantity demanded) ÷ (Change in price ÷ Average price)

= [(40 units - 30 units) ÷ 35] ÷ [(4 - 6) ÷ 5]

= (10 ÷ 35) ÷ (-2 ÷ 5)

= 0.2857 ÷ (-0.4)

= -0.71

Therefore, the cross-price elasticity of demand is -0.71, and X and Y are complement goods.

match each type of restriction with one of its effects.

a. land-use laws

b. labor laws

c. banking regulations

a. controlled development of towns and cities

b. protection of young workers

c. greater financial stability

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