Part 1
2. Assume that a consumer’s income increased from $67,500 in 2020 to $135,000 in 2021. This consumer spent 10 percent of her income ($6,750) on gasoline in 2020. If the income elasticity of demand for gasoline was equal to +0.8, would she spend more or less than $13,500 on gasoline in 2021? Briefly explain your answer
3. income elasticity for wheat is positive but less than +1.0. Use this information to answer the following question. Is wheat a normal good or an inferior good?
4. If an increase in the price of new automobiles causes an increase in the quantity demanded of used automobiles, would the cross-price elasticity of demand between new and used automobiles have a positive or a negative value? Briefly explain your answer
5. Assume that eggs and bacon are complementary goods. Would the cross-price elasticity of demand between eggs and bacon have a positive value or a negative value? Briefly explain your answer.
6. Assume that eggs and breakfast cereal are substitute goods. Would the cross-price elasticity of demand between eggs and breakfast cereal have a positive value or a negative value? Briefly explain your answer. The cross-price elasticity of demand measures the percentage change in the quantity demanded of one good in response to the percentage change in the price of another good. Would the cross-price elasticity of demand between Coca-Cola and Pepsi-Cola have a negative value or a positive value? Briefly explain your answer.
7. A research study found that the price elasticity of demand for Coca-Cola is -1.22, while the price elasticity of demand for all carbonated soft drinks is equal -0.70. Briefly explain why these two elasticities are different.