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1)Economists at the Coca Cola company have estimated that the cross price elasticity of demand between Coke and Pepsi is 0.90. They have also estimated
1)Economists at the Coca Cola company have estimated that the cross price elasticity of demand between Coke and Pepsi is 0.90. They have also estimated that the income elasticity of demand for Coke is 1.5.
a.Pepsi has recently lowered the price of Pepsi-Cola by 10%. What impact will this have on the demand for Coke?What advice would you give to Coke in terms of how it responds to this move by Pepsi?
b.Economists estimate that real GDP (national income) will increase by 3% this year. What impact will this have on the demand for Coke?
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