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a. Consider the following pairs of goods. In each of the cases, which of the two is likely to have the greater price elasticity of demand? Explain why?
i. carrots or vegetables
ii. gas during the month of June or during the full year
iii. milk or grape juice
b. Suppose a 5 percent increase in the price of a French fries causes a 10 percent drop in the quantity of French fries and a 2 percent drop in ketchup demanded.
i. What it the Elasticity of Demand for French fries? Is the demand for French fries inelastic?
ii. What is the Cross-price Elasticity of ketchup relative to French fries? Based on this measure, are French fries and ketchup substitutes?
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