The Cross Price Elasticity of Demand for Coke with Respect

question 9

Multiple Choice

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 percent in a period, how will that affect the demand for Coke in that period, all other things unchanged?

• A) The demand for Coke will increase due to the income effect.
• B) The demand for Coke will increase by 6.1 percent.
• C) The demand for Coke will fall by 6.1 percent.
• D) The demand for Coke will fall by 0.61 percent.

---

Definitions:

Responsibility Centres

Units or departments within an organization, each with specific responsibilities and performance metrics to manage financial outcomes.

Imputed Interest Rate

The estimated rate of interest, often applied in situations where no actual interest rate is specified in a financial transaction.

Required Rate of Return

The minimum annual percentage earned by an investment that will entice individuals or companies to put money into a particular security or project.

Invested Capital

Represents the total amount of money invested into a business by its owners and creditors, used for ongoing business operations.