Economist Jerry Hausman Estimated the Price Elasticity of Demand for "Post

question 15

Multiple Choice

Economist Jerry Hausman estimated the price elasticity of demand for "Post Raisin Bran" and "All types of breakfast cereals." He found that the price elasticity of demand for Post Raisin Bran was -2.5 and the price elasticity of demand for "All types of breakfast cereals" was -0.9. Which of the following can be implied from Hausman's estimates?

• A) The demand for "All types of breakfast cereals" is elastic.
• B) A 1 percent increase in the price of Post Raisin Bran will lead to a 25 percent decrease in the quantity demanded of Post Raisin Bran.
• C) The demand for Post Raisin Bran is more elastic than the demand for "All types of breakfast cereals."
• D) A 1 percent decrease in the price of breakfast cereals will lead to a 2.5 percent increase in the quantity demanded of Post Raisin Bran.

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