Slide 1 - Texas A_M University by shuifanglj

VIEWS: 1 PAGES: 1

									   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

								
To top