Question

question 6 When the price of soda is $1.00 per bottle, the quantity demanded for bottled water was 500 bottles per day. When the price of soda increased to $1.10 per bottle, the quantity demanded for bottled water increased to 600 bottles per day.

Please enter your answers as either positive or negative numeric answers. Please use a negative sign "-" to indicate a negative number and do not use parenthesis. (ie. -5 or -5% and not (5) or (-5%))

What is the percentage change in the price of soda?

What is the percentage change in the quantity demanded for bottled water?

What is the Cross-Price Elasticity of Demand (XPED) for bottled water with respect to the price of soda?

Are these two goods compliments or substitutes? Simply write the word "Compliments" or "Substitutes" into the text box.

When a buyers income increases from $1000 per week to $1100 per week, her quantity demanded of bottled water increases by from 10 bottles per week to 13 bottles per week.

What is the percentage change in the the buyer's income?

By what percentage did the quantity demanded for bottled water change in response?

What is the income Elasticity of Demand (IED) for bottled water?

Is bottled water a normal good or an inferior good? Simply write the word "normal" or "inferior" into the text box.

Answer 1

Ans.6

Old price of soda = 1

New price of soda = 1.10

Old Quantity demanded of bottled water = 500

New Quantity demanded of bottled water = 600

a. Percentage change in price of soda = P2 – P1 / P1 * 100 = 1.10 – 1 / 1 * 100 = 10 %

b.. Percentage change in QD of bottled water = Q2 – Q1 / Q1 * 100 = 20 %

c.. Cross price elasticity of Demand for Bottle water = %age change in QD of Bottled water / %age change in Price of soda

= 20 % / 10 %

= 2

d. There two goods are substitute goods, which means that when price of one good increases demand for its substitute good rises. Substitute goods have positive cross price elasticity of demand