arc price elasticity

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A local supermarket lowers the price of its Atlantic Salmon fillets from $12/lb. to $9.00/lb.

Sales increase by 20 percent. The store manager notices that T-bone steak sales decrease by

15 percent.

a. Calculate the arc price elasticity of salmon fillets. Explain what it means.

b. Calculate the arc cross-price elasticity of T-bone steak. Based on your calculation is T-

bone steak a substitute or a complement? Why?

c. Was the price decision good or bad for the supermarket? Explain.

d. If you were to estimate a demand equation for salmon fillets, which variables would you

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