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A store sells two related products , A and B. It is discovered that if the price of B is $2 per unit, the store

A store sells two related products, A and B. It is discovered that if the price of B is $2 per unit, the store is able to sell 800 units of A. If the price of B is $2.50 per unit, the store is able to sell 720 units of A.

(a) Calculate the cross price elasticity of demand using the mid-point method.Use it to explain the relationship between A and B.

(b) If the price of B increases by 5% and the price of A remains unchanged, what is the revenue from selling A?

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