Answered: positive, that is, Coke and Pepsi are…

Business

Economics

positive, that is, Coke and Pepsi are substitutes.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 5MC

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Question

If a 4 percent rise in the price of peanut butter lowers the total revenue received by the producers of peanut butter by 4 percent, the demand for peanut butter is

a. elastic.

b. inelastic

2. The cross elasticity of demand between Coca-Cola and Pepsi-Cola is

a. negative, that is, Coke and Pepsi are substitutes

b. positive, that is, Coke and Pepsi are substitutes.

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