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The price elasticity of demand for soft drinks is 2.0; the cross price elasticity of demand of soft drinks for iced tea is 1.5; the cross price elasticity of demand of soft drinks for popcorn is -2.0; and the income elasticity of demand for soft drinks is 1.2. Use this information to answer the following question.

A) Describe the relationship between soft drinks and popcorn and also describe how you know these two goods have this relationship.

B) Are soft drinks a normal or an inferior good given the above information? Explain your answer.

Macroeconomics, Economics

  • Category:- Macroeconomics
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