17. According to a Honda press release on October 23, 2006, sales of the fuel-efficient four-cylinder Honda

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17. According to a Honda press release on October 23, 2006, sales of the fuel-efficient four-cylinder Honda Civic rose by 7.1%

from 2005 to 2006. Over the same period, according to data from the U.S. Energy Information Administration, the average price of regular gasoline rose from $2.27 per gallon to $2.57 per gallon. Using the midpoint method, calculate the crossprice elasticity of demand between Honda Civics and regular gasoline. According to your estimate of the cross-price elasticity, are the two goods complements or substitutes? Does your answer make sense?

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Economics

ISBN: 978-0716771586

2nd Edition

Authors: Paul Krugman ,Robin Wells

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