For question 5(a)(I), how do I know which factor is the price change & which is the change in quantity demanded? I am somewhat not sure what they mean but I know the formula.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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As I understand it, all you are asking for is help in understanding the table that is in Question 5.  This is a table that shows you the cross elasticity of demand for these three products.

On the left side of the table, you have three goods: X, Y, and Z. Across the top, you have the goods whose prices will have an effect on quantity demanded for the other goods.  In other words, the goods (or, more precisely, their prices) along the top are the independent variable while the goods down the left side (more precisely, the quantity demanded of those goods) are the dependent variables.  Each cell in the table tells you how much the quantity demanded for the good on the left changes when the price of the good on the top changes.

In Question 5(a)(I), you are asked about the change in quantity demanded for Good Z when the price of Good Y increases.  To find the answer, you will have to use the cross elasticity of demand for those two goods.  You look for Good Z on the left and you go over until you are under Good Y on the top.  In other words, you look in the middle cell in the bottom row of the table.

In short, the top row of the table tells you which good’s price is changing and the left column tells you which good’s quantity demanded is changing in response to that price change.

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