(a)[8]
Cross elasticity of demand for bread with respect to the price of rice is +1.4 while the cross elasticity of demand for bread with respect to the price of butter is –0.7. Explain why the cross elasticity of demand figures for bread differ.
(b)[12]
Explain how price elasticity of demand and income elasticity of demand affect business decisions. Discuss which measure is likely to be more useful to a business.