The market demand for the chewing gum is as:
QG = 300 – 40PG – 8PS + 0.05I
Here:
QG = Quantity of gum demanded
PG = price of gum
PS = price of soda
I = average income in the market
Suppsoe that PG = $2, PS = $3, and I = $35
a. How much gum is required or demanded?
b. Determine the cross-price elasticity of demand between soda and gum?
c. Are soda and gum complements or substitutes ? And how do you know?