A study of the consumption of beverages in Mexico found that: \"Overall, for sof
ID: 1133421 • Letter: A
Question
A study of the consumption of beverages in Mexico found that: "Overall, for soft drinks a 10% price increase decreases the quantity consumed by 10.6%."
Source: M.A. Colchero, et al., "Price Elasticity of the Demand for Sugar Sweetened Beverages and Soft Drinks in Mexico," Economics and Human Biology, Vol. 19, December 2015, pp. 129-137.
Given this information, the price elasticity of demand for soda in Mexico is _____ . (Enter your response rounded to two decimal places. Use a negative sign if you are entering a negative number.)
Is demand price elastic or price inelastic? Briefly explain.
A.) Inelastic, because the percentage change in quantity demanded is less than the percentage change in price.
B.) Elastic, because the percentage change in quantity demanded is less than the percentage change in price.
C.) Inelastic, because the percentage change in quantity demanded is greater than the percentage change in price.
D.) Elastic, because the percentage change in quantity demanded is greater than the percentage change in price.
Explanation / Answer
Price elasticity=
%change in quantity demanded / %change in price
= -10.6/10= -1.06
Price elasticity= -1.06
D is correct
When %change in quantity demanded is greater than %change in price, demand is elastic. Or when elasticity is greater than 1 we have elastic demand.
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