Suppose That When the Price of Root Beer Rises 10

question 237

Multiple Choice

Suppose that when the price of root beer rises 10%, the quantity of pizza demanded falls 20%. This would mean that pizza and root beer are

• A) substitutes, with a cross price elasticity of 0.5.
• B) complements, with a cross price elasticity of -0.5.
• C) substitutes, with a cross price elasticity of -2.0.
• D) complements, with a cross price elasticity of -2.0.

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Definitions:

Periodic Inventory System

A method of inventory valuation that requires a physical count to determine the end-of-period inventory and cost of goods sold.

Gross Profit

The difference between revenue and the cost of goods sold, indicating the financial health and performance of a business.

Freight In

The cost associated with transporting goods from suppliers to the buyer, which is added to the cost of inventory.

Inventory Shrinkage

The loss of products between purchase from supplier and sale to customer, often due to theft, damage, or errors.