The cross elasticity of demand between Coca-Cola and Pepsi-Cola is ________. From this information, we know that Coke and Pepsi are ________.
A)positive; normal goods
B)positive; complements
C)negative; substitutes
D)positive; substitutes
E)negative; complements

Question

Quizplus · Accepted Answer

The cross elasticity of demand between Coca-Cola and Pepsi-Cola is positive, which means that as the price of Coca-Cola increases, the quantity demanded of Pepsi-Cola also increases, and as the price of Coca-Cola decreases, the quantity demanded of Pepsi-Cola decreases. This indicates that Coca-Cola and Pepsi-Cola are substitutes, as consumers are more likely to switch between the two when prices change.

The Cross Elasticity of Demand Between Coca-Cola and Pepsi-Cola Is