EQ #6 – AGEC 105 (3 pts in total) Capps – October 2, 2013 (1pt) 1. (a) According to this diagram, calculate the income elasticity of demand for pizza between points A and B. (0.5pts) (b) What kind of good is pizza? (1pt) 2. (a) Assume that a retailer sells 1000 six-packs of Pepsi per day at a price of $3/six-pack. You, as an economic analyst, estimate that the cross-price elasticity between Pepsi and Coca-Cola is 0.8. If the retailer raises the price of Coca-Cola by 5%, how would sales of Pepsi be affected, ceteris paribus? (0.5pts) (b) On the basis of this cross-price elasticity, we may conclude that Pepsi and Coca-Cola are _______________________. $60 $40 I QPizzas 2 6 A B