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 cross - price 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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