Finding Out own price elasticity also cross price elasticity.
Let the marketplace demand for rye bread be given by Q = 500 + I - 250Prye + 400Pwheat, where Q is monthly demand in number of loaves, I is average monthly income in dollars, Prye is the price of a loaf of rye bread also Pwheat is the price of a loaf of wheat bread. If I = $1,000, Prye = $2 also Pwheat = $3, Compute the following (based on 10% changes in denominators):
(a) The arc price elasticity of demand for rye bread
(b) The arc price elasticity of demand for wheat bread
(c) The arc cross-price elasticity of demand for rye bread