A Question per day - Day 2

1. The questions below concern yogurt. Assume that this market can be described by demand and supply curves.

a. Would the own-price elasticity for all yogurt be greater or less than the own-price elasticity for one particular brand of yogurt? Explain.

b. If the price of yogurt falls and yogurt suppliers experience and increase in revenues, then is the own-price elasticity of yogurt greater or less than one in absolute value? Explain.

c. If there is a 5% increase in consumer income and the income elasticity of yogurt is 2.5, then what will be the specific % change in the quantity of yogurt sold?

d. Does a positive cross-price elasticity imply that two goods are complements or substitutes? Explain.