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

question 91

Multiple Choice

Economists have estimated that the cross-price elasticity of demand between beer and spirits is 0.15,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.

---

Definitions:

Break-even Price

The price at which the total revenues of a business exactly cover its total costs, thus resulting in neither profit nor loss.

Marginal Revenue

The rise in income generated by selling an additional unit of a product or service.

Average Total Cost

The cost per unit of output, calculated by dividing the total production cost by the total quantity produced.

AVC Curve

A graph representing the average variable cost of producing different quantities of output, typically U-shaped due to economies and diseconomies of scale.