(a) The table below reveals the cross-price elasticity of demand for several goods. Goods pairing Air conditioning unit with electricity usage |Coke and Pepsi McDonald's burgers and Burger King burgers Butter and margarine Cross-price elasticity of demand -0.34 +0.63 +0.82 +1.54 Required: (i) Explain the sign of each of the cross-price elasticity. Describe the implication of the sign on the relationship between both items in the table above. (ii) Compare the absolute values of the cross-price elasticities and explain their magnitudes. Explain why the cross-price elasticity of McDonald's burgers and Burger King burgers is less than the cross-price elasticity of butter and margarine. (iii) Use the information in the table to calculate how a 5% increase in the price of Pepsi affects the quantity of Coke demanded.

(a) The table below reveals the cross-price elasticity of demand for several goods. Goods pairing Air conditioning unit with electricity usage |Coke and Pepsi McDonald's burgers and Burger King burgers Butter and margarine Cross-price elasticity of demand -0.34 +0.63 +0.82 +1.54 Required: (i) Explain the sign of each of the cross-price elasticity. Describe the implication of the sign on the relationship between both items in the table above. (ii) Compare the absolute values of the cross-price elasticities and explain their magnitudes. Explain why the cross-price elasticity of McDonald's burgers and Burger King burgers is less than the cross-price elasticity of butter and margarine. (iii) Use the information in the table to calculate how a 5% increase in the price of Pepsi affects the quantity of Coke demanded.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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