ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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
expand button
Transcribed Image Text: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.
expand button
Transcribed Image Text: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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