"Slide 1 - Texas A_M University"
EQ #7 – AGEC 105 – February 24, 2010 (2pts) 1. (a) According to this diagram, calculate the income elasticity of demand for pizza between points A and B. = 0.4 (1pt) (b) What kind of good is pizza? Necessity I B $35,000 A $25,000 14 16 QPizza (1 pt) 2. Assume that you are an economic analyst for Pepsi. You suspect that if Coca-Cola raises the price for its products by 5%, the quantity demanded of Pepsi products will rise by 2%, all other factors invariant. What is the cross-price elasticity between Pepsi and Coca-Cola products? = 0.4