Border Snacks Inc. produces and sells picante sauce, nacho chips, and queso dip. The company's marketing department estimated a linear demand function for Border's picante sauce: where is the number of jars of picante sauce sold per month, is the price of picante sauce, is the price of a bag of nacho chips, is the price of a jar of queso dip, and M is consumer income. In the market served by Border Snacks, income is currently $16,000. The following regression results were obtained using 22 monthly observations:
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-If the price of nacho chips falls by 2.4%, Border Snacks can expect sales of its picante sauce to ___________________ (increase, decrease) by _______%. (HINT: Begin by computing the appropriate estimated cross-price elasticity.) Show your work below:

Question

Border Snacks Inc. produces and sells picante sauce, nacho chips, and queso dip. The company's marketing department estimated a linear demand function for Border's picante sauce:  where  is the number of jars of picante sauce sold per month,  is the price of picante sauce,  is the price of a bag of nacho chips,  is the price of a jar of queso dip, and M is consumer income. In the market served by Border Snacks, income is currently $16,000. The following regression results were obtained using 22 monthly observations:
‪ 
-If the price of nacho chips falls by 2.4%, Border Snacks can expect sales of its picante sauce to ___________________ (increase, decrease) by _______%. (HINT: Begin by computing the appropriate estimated cross-price elasticity.) Show your work below:

Quizplus · Accepted Answer

The Answer of Border Snacks Inc. produces and sells picante sauce, nacho chips, and queso dip. The company's marketing department estimated a linear demand function for Border's picante sauce:  where  is the number of jars of picante sauce sold per month,  is the price of picante sauce,  is the price of a bag of nacho chips,  is the price of a jar of queso dip, and M is consumer income. In the market served by Border Snacks, income is currently $16,000. The following regression results were obtained using 22 monthly observations:
‪ 
-If the price of nacho chips falls by 2.4%, Border Snacks can expect sales of its picante sauce to ___________________ (increase, decrease) by _______%. (HINT: Begin by computing the appropriate estimated cross-price elasticity.) Show your work below: