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Economists estimated that the price elasticity of beer is -0.23 and the income elasticity of beer...

Economists estimated that the price elasticity of beer is -0.23 and the income elasticity of beer is -0.09. This means that

A) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.

B) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.

C) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good.

D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity.

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Answer #1

Ans) the correct option is A) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.

Inferior goods have negative Income elasticity. Since the price elasticity of demand is less than 1 so the demand is inelastic meaning a small change in price will not lead to larger change in quantity demanded.

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