The accompanying table lists the cross-price elasticities of demand for several goods, where the percent quantity change is measured for the first good of the pair, and the percent price change is measured for the second good. ( please see image)a. Explain the sign of each of the cross-price elasticities. What does it imply about the relationship between the two goods in question? b. Compare the absolute values of the cross-price elasticities and explain their magnitudes. For example, why is the cross-price elasticity of McDonald’s burgers and Burger King burgers less than the cross-price elasticity of butter and margarine? c. Use the information in the table to calculate how a 10% increase in the price of Pepsi affects the quantity of Coke demanded. d. Use the information in the table to calculate how a 5% decrease in the price of gasoline affects the quantity of SUVs demanded. GoodAir-conditioning units and kilowatts ofelectricityCoke and PepsiCross-price elasticities of demand(SUVS) and gasolineMcDonald's burgers and Burger KingburgersButter and margarine-0.38+0.68High-fuel-consuming sport-utility vehicles -0.30+0.88+1.62 The accompanying table lists the cross-price elasticities of demand for several goods, where thepercent quantity change is measured for the first good of the pair, and the percent price change ismeasured for the second good.GoodCross-price elasticities of demandAir-conditioning units and kilowatts ofelectricityCoke and PepsiHigh-fuel-consuming sport-utility vehicles -0.30-0.38+0.68(SUVS) and gasolineMcDonald's burgers and Burger KingburgersButter and margarinea. Explain the sign of each of the cross-price elasticities. What does it imply about the relationshipbetween the two goods in question?+0.88+1.62b. Compare the absolute values of the cross-price elasticities and explain their magnitudes. Forexample, why is the cross-price elasticity of McDonald's burgers and Burger King burgers less than thecross-price elasticity of butter and margarine?c. Use the information in the table to calculate how a 10% increase in the price of Pepsi affects thequantity of Coke demanded.7d. Use the information in the table to calculate how a 5% decrease in the price of gasoline affects thequantity of SUVs demanded.

Price elasticity determines the % change in the demanded quantity with respect to a unitary change…

Answered: The accompanying table lists the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The accompanying table lists the cross-price elasticities of demand for several goods, where the
percent quantity change is measured for the first good of the pair, and the percent price change is
measured for the second good.

( please see image)

a. Explain the sign of each of the cross-price elasticities. What does it imply about the relationship
between the two goods in question?
b. Compare the absolute values of the cross-price elasticities and explain their magnitudes. For
example, why is the cross-price elasticity of McDonald’s burgers and Burger King burgers less than the
cross-price elasticity of butter and margarine?
c. Use the information in the table to calculate how a 10% increase in the price of Pepsi affects the
quantity of Coke demanded.
d. Use the information in the table to calculate how a 5% decrease in the price of gasoline affects the
quantity of SUVs demanded.

Good
Air-conditioning units and kilowatts of
electricity
Coke and Pepsi
Cross-price elasticities of demand
(SUVS) and gasoline
McDonald's burgers and Burger King
burgers
Butter and margarine
-0.38
+0.68
High-fuel-consuming sport-utility vehicles -0.30
+0.88
+1.62

The accompanying table lists the cross-price elasticities of demand for several goods, where the
percent quantity change is measured for the first good of the pair, and the percent price change is
measured for the second good.
Good
Cross-price elasticities of demand
Air-conditioning units and kilowatts of
electricity
Coke and Pepsi
High-fuel-consuming sport-utility vehicles -0.30
-0.38
+0.68
(SUVS) and gasoline
McDonald's burgers and Burger King
burgers
Butter and margarine
a. Explain the sign of each of the cross-price elasticities. What does it imply about the relationship
between the two goods in question?
+0.88
+1.62
b. Compare the absolute values of the cross-price elasticities and explain their magnitudes. For
example, why is the cross-price elasticity of McDonald's burgers and Burger King burgers less than the
cross-price elasticity of butter and margarine?
c. Use the information in the table to calculate how a 10% increase in the price of Pepsi affects the
quantity of Coke demanded.
7
d. Use the information in the table to calculate how a 5% decrease in the price of gasoline affects the
quantity of SUVs demanded.

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