Soft Drinks Are a Normal Good

question 247

Essay

Soft drinks are a normal good. Draw a graph showing the effect of an increase in income on the demand for soft drinks.

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Definitions:

Colluding Firms

Companies that engage in an agreement, often secretly, to limit competition and increase prices for mutual benefit.

Cost Function

A mathematical expression that describes how the costs incurred by a firm or individual vary with the level of activity or output.

Market Demand

The total quantity of a good or service that all consumers in a market are willing to purchase at different prices.

Cartel

An association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.