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Gao and colleagues have estimated that the cross-price elasticity of demand between beer and wine is 0.31
If the price of wine increases by 10 percent, then the quantity of beer demanded will _____ by _____ percent
In addition, Gao and colleagues have estimated the income elasticity of demand for beer to be -0.09. If so, then beer is
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1) a. When the price elasticity of demand is greater than one, demand is defined to be elastic.
b. When the price elasticity of demand is less than one, the demand is defined to be inelastic.
c. When the price elasticity of demand is equal to one, the demand is said to have unit elasticity.
2) In general, the flatter the demand curve that passes through a given point, the more elastic the demand.
Extreme Cases
3) a. When the price elasticity of demand is equal to zero, the demand is perfectly inelastic and is a vertical line.
b. When the price elasticity of demand is infinite, the demand is perfectly elastic and is a horizontal line.