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The cross-price elasticity of demand between Coca-Cola and Pepsi is likely to be _____
A) positive, that is, Coke and Pepsi are complements.
B) negative, that is, Coke and Pepsi are complements.
C) positive, that is, Coke and Pepsi are substitutes.
D) negative, that is, Coke and Pepsi are substitutes.

Respuesta :

Answer:

Option (C) is correct

Explanation:

Coke and Pepsi are substitute goods, which means that there is a positive relationship between the price of coke and the demand for Pepsi. If the price of coke increases then as a result the demand for Pepsi increases though the price of Pepsi remains the same and if the price of coke decreases then as a result the demand for Pepsi decreases.

This shows that cross-price elasticity of demand between Coca-Cola and Pepsi is likely to be Positive because both are substitute goods.

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