Question 15 bobby has been buying store brand lunch meat for...

QUESTION 15 Bobby has been buying store-brand lunch meat for the past 10 years. He receives a raise and now goes to the deli counter. We can assume he found the income elasticity to be.. E>1 E<0 0 Positive QUESTION 15 Bobby has been buying store-brand lunch meat for the past 10 years.He receives a raise and now goes to the deli counter.We can assume he found the income elasticity to be. OE>1 O E<0 O0<E<1 O Positive

Transcript

00:01 So here we have a rapid -fire set of questions on elasticity.

00:04 The first one is false, right? minus 0 .75 is more elastic, right? remember that elastic is equal to how quantity responds to price.

00:18 So as the absolute magnitude of this number gets bigger, it's saying that the quantity moves by more relative to price, so it's more elastic.

00:26 B, we're told that the cross price elasticity, juice and milk are substitutes.

00:33 So let's think about what happens.

00:35 Let's imagine that the price of juice goes up.

00:38 This means that the quantity of juice goes down, right? that's what we call the law of demand.

00:44 And now by substitutes, right, since we are drinking less juice, we want more milk.

00:51 So the quantity of milk should go up, right? price of juice up, quantity of juice up.

00:56 Juice down law of demand substitutes replace the juice with milk quantity of milk goes up so the percentage change in the quantity of milk over the percentage change in the price of juice is going to be positive over positive which is equal to positive so this is false right the elasticity should be positive if substitutes right because you see you connect the middle chain by thinking about well you start with the price, then connect it to the quantities and get the elasticity.

01:29 Um, c, right? um, what do we have here? we have an elasticity problem.

01:36 We're thinking about an income elasticity, right? the, uh, income elasticity is how quantity reacts to a change in your income.

01:45 We know that this change in income is equal to plus 10%...

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