Let's break down part (a) and solve it step by step.

Problem: A 20% increase in the price of Product A causes a 10% decrease in its quantity demanded, but no change in the quantity demanded of Product B.

We are asked to calculate the cross-price elasticity of demand between Product A and Product B. The formula for cross-price elasticity is:

$\text{Cross-price elasticity} = \frac{\%\ \text{change in quantity demanded of Product B}}{\%\ \text{change in price of Product A}}$

Step 1: Identify the values

• % change in price of Product A = 20% (increase)
• % change in quantity demanded of Product B = 0% (no change)

Step 2: Apply the values to the formula

Since the quantity demanded of Product B does not change, we have:

$\text{Cross-price elasticity} = \frac{0\%}{20\%} = 0$

Step 3: Interpret the result

The cross-price elasticity is 0, which means that the demand for Product B does not change in response to changes in the price of Product A. Hence, the relationship between Product A and B is that they have no relationship (they are neither complements nor substitutes).

Final Answer:

• Cross-price elasticity between A and B: 0
• Relationship between A and B: no relationship

Would you like any further details or clarification on this?

Here are 5 related questions to expand your understanding:

1. What is the cross-price elasticity when products are substitutes?
2. How does the cross-price elasticity differ when products are complements?
3. Can a cross-price elasticity ever be negative? What does that imply?
4. Why would two products have no relationship in terms of cross-price elasticity?
5. How can cross-price elasticity affect pricing strategies in the market?

Tip: Cross-price elasticity helps firms understand how a change in the price of one good can affect the demand for another, which is crucial for competitive and complementary product pricing strategies.