This Question 2 pts Time Remaining 012326 2 of 15 complete I

This Question 2 pts Time Remaining: 0123.26 2 of 15 complete In Party Ville, the price elasticity of demand for soda is 0.4, the income elasticity ofdemand for soda is 0.3. and the cross elasticity of demand for soda with respect to juice is 0.4. Soda and juice are OA inferior goods OB, complements OC, substitutes OD luxury goods If the price of juice increases by 15 percent with no change in the price ofa can of soda, the quantity of soda dby percent.

Solution

Soda and juice are substitutes, since their cross elasticity of demand is positive.

Answer: Option C is correct.

Ec = (% change in quantity of soda) / (% change in price of juice)

0.4 = (% change in quantity of soda) / 15

Percentage change in quantity of soda = 0.4 × 15

                                                            = 6 %

Answer: The quantity of soda will increase by 6 percent