8. Substitutes, complements, or unrelated?You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin patties, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods.Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties decreases by 5%, the quantity of frizzles sold increases by 4% and the quantity of kipples sold decreases by 6%. Your job is to use the cross-price elasticity between penguin patties and the other goods to determine which goods your marketing firm should advertise together.Complete the first column of the following table by computing the cross-price elasticity between penguin patties and frizzles, and then between penguin patties and kipples. In the second column, determine if penguin patties are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which good you should recommend marketing with penguin patties. Relative to Penguin PattiesRecommend Marketing with Penguin PattiesCross-Price Elasticity of DemandComplement or SubstituteFrizzles Kipples 8. Substitutes, complements, or unrelated?You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin patties,frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a newadvertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know thatcomplements are typically consumed together while substitutes can take the place of other goods.Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties decreases by 5%, the quantity of frizzles soldincreases by 4% and the quantity of kipples sold decreases by 6%. Your job is to use the cross-price elasticity between penguin patties and the othergoods to determine which goods your marketing firm should advertise together.Complete the first column of the following table by computing the cross-price elasticity between penguin patties and frizzles, and then betweenpenguin patties and kipples. In the second column, determine if penguin patties are a complement to or a substitute for each of the goods listed.Finally, complete the final column by indicating which good you should recommend marketing with penguin patties.Relative to Penguin PattiesCross-Price Elasticity of Demand Complement or SubstituteRecommend Marketing with Penguin PattiesFrizzlesKipples

Cross price elasticity measures the effect on the quantity demanded of a good due to the change in…

You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin patties, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties decreases by 5%, the quantity of frizzles sold Increases by 4% and the quantity of kipples sold decreases by 6%. Your job is to use the cross-price elasticity between penguin patties and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity between penguin patties and frizzles, and then between penguin patties and kipples. In the second column, determine if penguin patties are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which good you should recommend marketing with penguin patties. Relative to Penguin Patties Cross-Price Elasticity of Demand Complement or Substitute Recommend Marketing with Penguin Patties Frizzles Kipples

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 7MC

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8. Substitutes, complements, or unrelated?

You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin patties, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods.

Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties decreases by 5%, the quantity of frizzles sold increases by 4% and the quantity of kipples sold decreases by 6%. Your job is to use the cross-price elasticity between penguin patties and the other goods to determine which goods your marketing firm should advertise together.

Complete the first column of the following table by computing the cross-price elasticity between penguin patties and frizzles, and then between penguin patties and kipples. In the second column, determine if penguin patties are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which good you should recommend marketing with penguin patties.

	Relative to Penguin Patties	Recommend Marketing with Penguin Patties
Cross-Price Elasticity of Demand	Complement or Substitute
Frizzles
Kipples

8. Substitutes, complements, or unrelated?
You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin patties,
frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new
advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that
complements are typically consumed together while substitutes can take the place of other goods.
Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties decreases by 5%, the quantity of frizzles sold
increases by 4% and the quantity of kipples sold decreases by 6%. Your job is to use the cross-price elasticity between penguin patties and the other
goods to determine which goods your marketing firm should advertise together.
Complete the first column of the following table by computing the cross-price elasticity between penguin patties and frizzles, and then between
penguin patties and kipples. In the second column, determine if penguin patties are a complement to or a substitute for each of the goods listed.
Finally, complete the final column by indicating which good you should recommend marketing with penguin patties.
Relative to Penguin Patties
Cross-Price Elasticity of Demand Complement or Substitute
Recommend Marketing with Penguin Patties
Frizzles
Kipples

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