Business, 12.02.2020 03:09 mary9664

Suppose the following table describes Jocelyn's weekly snack purchases, which vary depending on the price of a bag of chips:

Price of bag of chips Bags of chips Containers for salsa Bags of pretzels Cans of soda
$1.00 2 3 1 4
$1.50 1 2 2 4

a. Compute the cross-price elasticity of salsa with respect to the price of a bag of chips. Are chips and salsa substitutes or complements? How do you know?
b. Compute the cross-price elasticity of pretzels with respect to the price of a bag of chips. Are chips and pretzels substitutes or complements? How do you know?
c. Compute the cross-price elasticity of soda with respect to the price of a bag of chips. Are chips and soda substitutes or complements? How do you know?
d. You find that the income elasticity for a particular good is +2.5. Is this a normal or inferior good? Is it a luxury good or a necessity?
e. You find that the income elasticity for a particular good is -0.5. Is this a normal or inferior good? Is it a luxury good or a necessity?
f. Given that each row on the vending machines can only hold chips or candy bars, if a new research study suggests that eating chocolate will make you healthier, then candy bars will become more popular. This will increase the demand for candy bars (and also the price you can charge). If people are willing to pay more for candy bars, what do you think should happen to the supply of chips? (You can only put candy bars OR chips in the vending machine, what happens to the supply of chips?) Do you think that the cross price elasticity of supply between chips and candy bars should be positive or negative?

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Suppose the following table describes Jocelyn's weekly snack purchases, which vary depending on the...

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