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Question - Price Elasticity, Cross-Price Elasticity, and Income Elasticity in the Market for Alcoholic Beverages

Many public policy issues are related to the consumption of alcoholic beverages. These issues include underage drinking, drunk driving, and the possible beneficial effects of red wine in lowering the risk of heart disease. In the table presented below the economists have estimated statistically the following elasticities:

Price elasticity of demand for beer -0.23

Cross-price elasticity of demand between beer and wine 0.31

Cross-price elasticity of demand between beer and spirits 0.15

Income elasticity of demand for beer -0.09

Income elasticity of demand for wine 5.03

Income elasticity of demand for spirits 1.21

What can you determine about consumer demand for the three products from this information?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93118587

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