Question : The cross elasticity of demand between CocaCola and PepsiCola is ________ so Coke and Pepsi are ________.
Option 1: Positive; complements
Option 2: Negative; substitutes
Option 3: Negative; complements
Option 4: Positive; substitutes
Correct Answer: Positive; substitutes
Solution : A product or service that consumers perceive to be substantially the same as or sufficiently similar to another product is referred to as a substitutable good. Hence coke and Pepsi Cola are substitute goods and they have a positive relationship. So option d is the correct answer.
Question : If the cross elasticity of demand between two goods is negative, it means the goods are:
Option 1: Substitutes.
Option 2: Complements.
Option 3: Inferior goods.
Option 4: Normal goods.
Question : If the cross elasticity of demand between two goods is zero, it means the goods are:
Option 3: Independent.
Question : The cross elasticity of demand assesses how responsively a certain good's quantity desired is to changes in its prices.
Option 1: Its complements but not its substitutes.
Option 2: It's a substitute but not its complement.
Option 3: Its substitutes and complements
Option 4: Neither its substitutes nor its complements
Question : If two commodities are complements, then their cross-price elasticity is
Option 1: zero
Option 2: positive
Option 3: negative
Option 4: imaginary number
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