A large Coca- Cola vendor recently hired some economic analysts to assess the effect of a price increase in its 16-ounce bottles from $ 1.00 to $ 2.00. The analysts determined that, on average, the vendor€™s customers spend about $ 15.00 on soda (Coke and all other brands) each week, and the average price for other 16- ounce soda bottles is $ 1.00. The analysts also utilized some focus groups to determine the preferences of the vendor€™s customers. They used this analysis to build the following graph:

Suppose X0 = 9 and X1 = 7. Should the vendor expect to sell 7, more than 7, or less than 7 bottles of Coke after raising the price to $ 2.00 if Coke is a normalgood?

Transcribed Image Text:

Bottles of Other Soda Budget line with price of $1.00 Budget line with price of $2.00 Xo Bottles of Coke