Assume that the income elasticities for soft drinks and beer are .5 and .8 respectively. a. How much would total expenditures on soft drinks change as a result of a 10% increase in income assuming no change in the prices of soft drinks or beer? b. How would a 10% increase in income be expected to affect total expenditures on beer, assuming no change in the prices of soft drinks or beer? c. Given your answers to part b, would you expect the typical household with $40,000 annual income to have a larger or smaller share of their total expenditures allocated to beer compared to a typical household with $60,000 annual income? Explain the logic underlying your answer.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Assume that the income elasticities for soft drinks and beer are .5 and .8 respectively.

a. How much would total expenditures on soft drinks change as a result of a 10% increase in income assuming no change in the prices of soft drinks or beer?

b. How would a 10% increase in income be expected to affect total expenditures on beer, assuming no change in the prices of soft drinks or beer?

c. Given your answers to part b, would you expect the typical household with $40,000 annual income to have a larger or smaller share of their total expenditures allocated to beer compared to a typical household with $60,000 annual income? Explain the logic underlying your answer. 

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