Economists Estimated That the Cross-Price Elasticity of Demand for Beer

question 79

Multiple Choice

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03.This means that

• A)beer and wine are substitutes and wine is an inferior good.
• B)beer and wine are complements and wine is a luxury good.
• C)beer and wine are substitutes and wine is a luxury good.
• D)beer and wine are complements and wine is an inferior good.

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Definitions:

Population Proportions

A statistical measure that indicates the fraction of the population possessing a particular attribute or characteristic.

Normal Approximation

The process of using the normal distribution as an approximation for another distribution, commonly applied when the sample size is large.

Binomial

A type of probability distribution with two possible outcomes, used to model situations with fixed numbers of trials and the same probability of success.

Population Proportions

The ratio of members in a statistical population who have a particular attribute, compared to the total number of members in the population.