1.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 choose as explanatory variables?