Answer to Question #99032 in Microeconomics for young keda

Question

You are given the following information about a shop attendant that says: when the price of pepsi was Ghc 2 the quantity demanded of pepsi was 10 bottles a month and the quantity demanded of mirinda was 20 bottles per month. When the price of pepsi decreased to Ghc1, the quantity demanded of pepsi increased to 25 bottles a month and the quantity demanded of mirinda decreased to 5 bottles a month. It was also realized that her monthly income increased from Ghc 100 to Ghc 150.
i. Is pepsi an elastic or inelastic good?
ii. What type of good is pepsi and mirinda?
iii. What is the relationship between pepsi and mirinda?

Answer 1

i.                    Pepsi is an elastic good because change in it price result in a significant change in demand.

ii.                  They are substitute goods because they are both used for the same purpose.

iii.                Pepsi is a close substitute of mirinda.