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Suppose the demand curve for a product is given as Q = 10 – 2P + Po where P is the price of the product, Po is the price of another good, and Q is the quantity demanded. Assume the price of the other good is $2.00. a. Suppose P = $1.00. What is the price elasticity of demand? What is the cross-price elasticity of demand? Is the other good a substitute or a complement of the product demanded? b. Suppose the price of the good (P) increases to $2.50. What are the values for the price elasticity of demand and the cross-price elasticity of demand now?
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