A study of consumers in Chile found that the cross-price elasticity of demand between soda and milk was 0.25, while the cross-price elasticity of demand between soda and candy and other sweet snacks was 0.

a. What does the information tell us about the relationship in Chile between soda and milk? Between soda and candy? Does either result surprise you? Briefly explain.

b. If the Chilean government increases the tax on soda enough that its price increases by 10 percent, what will happen to the quantity of milk sold? What will happen to the quantity of candy sold?