The Cross-Price Elasticity of Demand for Coke with Respect to the Price

question 160

Essay

The cross-price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61.If the price of Pepsi falls by 10% in a period, how will that affect the demand for Coke in that period, all other things unchanged?
A.The demand for Coke will decrease but by less than 6.1%.
B.The demand for Coke will decrease by 6.1%.
C.The demand for Coke will not change because many people prefer Coke to Pepsi.
D.The demand for Coke will rise.

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Definitions:

Dollar

The official currency of several countries, including the United States, often considered a benchmark and reserve currency worldwide.

Net Exports

The value of a country's total exports minus its total imports, representing the contribution of the trade balance to the overall GDP.

GDP

Gross Domestic Product, the total value of all goods and services produced over a specific time period within a country.

Government Purchases

Expenditures made by the government sector, including spending on goods and services by local, state, and federal governments.