Economists Have Estimated That the Cross-Price Elasticity of Demand Between

question 265

Multiple Choice

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03. These elasticities mean that

• A) beer and spirits are complements; spirits and wine are luxuries.
• B) beer and spirits are normal goods; spirits and wine are luxuries.
• C) beer and spirits are complements; spirits are substitutes.
• D) beer and spirits are substitutes; spirits and wine are luxuries.

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