question archive Economists estimated that the price elasticity of beer is -0
Economists estimated that the price elasticity of beer is -0
Subject:EconomicsPrice:2.88 Bought3
Economists estimated that the price elasticity of beer is -0.23 and the income elasticity of beer is- 0.09. This means that
A) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good.
B) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity.
C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.
D) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
- The correct answer is: D) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.
Since the demand for beer is inelastic, then an increase in the price of beer will increase the total revenue for beer sellers. Negative income elasticity of demand means that beer is an inferior good. Its demand decreases with an increase in income.
