A 10 Percent Increase in the Price of Soda Leads

question 1

Multiple Choice

A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:

• A) elasticity of demand for soda 0.5 and is inelastic.
• B) elasticity of demand for iced tea is 2 and is elastic.
• C) cross-price elasticity of demand for soda is -0.5.
• D) cross-price elasticity of demand for iced tea is -2.

---

Definitions:

Lawn Care Services

Services that include maintenance and aesthetic care of lawns, such as mowing, fertilizing, and weed control.

Illegal Drugs

Substances whose production, sale, or possession are prohibited by law.

Price Index

A statistical measure that shows changes in the cost of acquiring a specific basket of goods and services over time.

Underground Economy

Economic activity that occurs outside of government regulation and taxation, including both illegal activities and unreported income from legal sources.