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greencrab765Lv1
28 Sep 2019
Suppose the demand for beer is characterized by the following elasticities: own-price elasticity = -2.5; cross-price elasticity with soda = +3; income elasticity = +2. Based on the given elasticities, answer the following questions. Explain your answers.
a. If a firm in the industry wishes to increase total sales revenue (ignoring cost considerations), will it raise or lower its selling price? Why?
b. What happens to the demand for a beer if the price of soda falls by 2%? Explain your answer.
c. What happens to the demand for a beer if consumer income rises by 5%? Be specific.
d. Is beer a normal or inferior good? Explain.
Suppose the demand for beer is characterized by the following elasticities: own-price elasticity = -2.5; cross-price elasticity with soda = +3; income elasticity = +2. Based on the given elasticities, answer the following questions. Explain your answers.
a. If a firm in the industry wishes to increase total sales revenue (ignoring cost considerations), will it raise or lower its selling price? Why?
b. What happens to the demand for a beer if the price of soda falls by 2%? Explain your answer.
c. What happens to the demand for a beer if consumer income rises by 5%? Be specific.
d. Is beer a normal or inferior good? Explain.
larryrambo777Lv10
9 Mar 2023
Joshua StredderLv10
28 Sep 2019
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