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We would expect the cross elasticity of demand between pepsi and coke to be:

A. positive, indicating normal goods.
B. positive, indicating inferior goods.
C. positive, indicating substitute goods.
D. negative, indicating substitute goods.

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Kristelle Balando
Kristelle BalandoLv10
25 Aug 2020
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Related questions

1. Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If ay is positive, then:
A. goods y and x are complements.
B. goods y and x are inferior goods.
C. goods y and x are normal goods.
D. goods y and x are substitutes.

 

2. Suppose the supply of good X is given by QSx = 10 + 2Px. How many units of good X are produced if the price of good X is 20?
A. 10.
B. 20.
C. 30.
D. None of the statements associated with this question is correct.

if the cross-price elasticity of demand for two goods is 1.25, then the two goods would be

A. complements.
B. luxuries.
C. normal goods.
D. substitutes.

The demand curve for Coke has been estimated to be:

Q =20 – 3PCoke + 5.5PPepsi+ .75 I

Where Q is the quantity of Coke purchased

PCoke is the price of Coke

PPepsi is the price of Pepsi

I is the income of consumers

Assume that currently the price of Coke is 1, the price of Pepsi is 2, and income is 10.

A. Calculate (using the point estimate and the current values) the own-price elasticity of demand for Coke

B. Calculate the cross-price elasticity of demand for Coke.

C. Calculate the income elasticity of demand for Coke.

D. What does the sign of the cross-price elasticity indicate about Coke and Pepsi?

E. What does the sign of the income elasticity indicate about Coke?

F. Is Coke a luxury or necessity? Explain.

G. If Coke wants to increase its sales revenues should it raise or lower the price of Coke—explain using concepts of elasticity.

Elasticity - point method (since you have estimated equation)

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