ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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positive, that is, Coke and Pepsi are complements.
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negative, that is, Coke and Pepsi are complements.
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positive, that is, Coke and Pepsi are substitutes.
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negative, that is, Coke and Pepsi are substitutes.
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Detailed explanation-1: -SOLVED: The cross elasticity of demand between Coca-Cola and Pepsi-Cola is positive, that is, Coke and Pepsi are substitutes because. Download the App!
Detailed explanation-2: -We would expect the cross elasticity of demand between Pepsi and Coke to be: Positive, indicating substitute goods.
Detailed explanation-3: -Substitute Goods: these are those goods that can take each other’s place/replace each other. For example, Coke and Pepsi, tea and coffee etc. Complementary Goods: these are goods which collectively satisfy the demands of a customer. Complimentary goods are not exclusive of each other.
Detailed explanation-4: -Coke is an elastic good. If the price of Pepsi increases by 1%, we can expect a 1.55% )*(2*&3* in the amount of Pepsi sold. Pepsi is an elastic good. Coke is slightly more elastic than Pepsi.