To solve this problem, we need to calculate the cross-price elasticity of demand between Product A and Product B.

Cross-Price Elasticity of Demand Formula

The cross-price elasticity of demand is calculated as:

$\text{Cross-Price Elasticity} = \frac{\text{Percentage Change in Quantity Demanded of Product B}}{\text{Percentage Change in Price of Product A}}$

In this problem:

• The percentage change in price of Product A is +20% (since there is a 20% increase in price).
• The percentage change in quantity demanded of Product B is 0% (since there is no change in the quantity demanded of Product B).

Calculation

$\text{Cross-Price Elasticity} = \frac{0\%}{20\%} = 0$

Interpretation

The cross-price elasticity is 0, which indicates that there is no relationship between these goods. When the price of Product A changes, it does not affect the demand for Product B.

Answer

• The cross elasticity of these goods is: 0.0
• The relationship between these goods is: No relationship

If you have more questions or need additional details, feel free to ask!

Related Questions:

1. How is cross-price elasticity different from price elasticity of demand?
2. What does a positive cross-price elasticity indicate about the relationship between two products?
3. How would you interpret a negative cross-price elasticity value?
4. What factors can cause cross-price elasticity between two products to change over time?
5. How is cross-price elasticity used in market analysis?

Tip:

When interpreting cross-price elasticity, always remember:

• A positive value indicates substitute goods.
• A negative value indicates complementary goods.
• A value of zero indicates no relationship between the goods.