The cross-price elasticity of demand between Coca-Cola and Pepsi is likely to be _____
A)negative because the goods are complements.
B)positive because the goods are complements.
C)negative because the goods are substitutes.
D)positive because the goods are substitutes.
E)zero because the goods are not usually consumed by the same person at one time.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand between Coca-Cola and Pepsi is likely to be positive because these two goods are substitutes. As the price of one increases, consumers are likely to switch to the other, leading to an increase in demand for the other product, and thus a positive cross-price elasticity of demand.

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