The manager of a Cape Town superette carries a stock of Jive soft drinks. The country experiences an economic recession which yields an anticipated consumer income decrease of 6 %. As a result, the income elasticity of demand for this product is estimated to be –2.5. (a) Calculate the percentage change in the quantity of your soft drink orders required to accommodate the new demand without a surplus or shortage of inventory. [3] (b) What does the elasticity coefficient of –2.5 reveal? [3]

The manager of a Cape Town superette carries a stock of Jive soft drinks. The country experiences an economic recession which yields an anticipated consumer income decrease of 6 %. As a result, the income elasticity of demand for this product is estimated to be –2.5. (a) Calculate the percentage change in the quantity of your soft drink orders required to accommodate the new demand without a surplus or shortage of inventory. [3] (b) What does the elasticity coefficient of –2.5 reveal? [3]

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 6SCQ: Suppose you are in change of sales at a pharmaceutical company, and your firm has a new drug that...

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