se the following data to answer the questions: Price elasticity of demand for beer = 0.23...
se the following data to answer the questions:
Price elasticity of demand for beer = 0.23
Cross-price elasticity of demand between beer & wine = 0.31
Cross-price elasticity of demand between beer & spirits = 0.15
Income elasticity of demand for beer = - 0.09 (NOTE: negative)
Income elasticity of demand for wine =5.03
Income elasticity of demand for spirits = 1.21 (NOTE: spirits = liquor)
What can we say about price elasticity of demand (ED) for beer?
| The demand for beer is elastic. |
| The demand for beer is inelastic. |
| Beer is an inferior good. |
| Beer is a normal good. |
Homework Answers
The value for price elasticity for beet is just 0.23, as it is below 1 we can say that the beer's demand is price inelastic. The answer is "A".
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Price elasticity of demand for beer = 0.23...
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Economists estimated that the price elasticity of beer is -0.23 and the income elasticity of beer is -0.09. This means that A) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. B) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. C) an increase in the price of beer will increase the...
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Consider some determinants of the price elasticity of
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• The availability of close substitutes
• Whether the good is a necessity or a luxury
• How broadly you define the market
• The time horizon being considered
A good with many close substitutes is likely to have relatively
__(Elastic, Inelastic)___ demand since consumers can easily choose
to purchase one of the close substitutes if the price of the good
rises.
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