We Would Expect the Cross Elasticity of Demand for Pepsi

question 133

Multiple Choice

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because

• A)soft drinks are normal goods.
• B)the income effect always exceeds the substitution effect.
• C)there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.
• D)there are more good substitutes for soft drinks as a whole than for Pepsi specifically.

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Definitions:

Diversification

An investment strategy aimed at reducing risk by allocating investments among various financial instruments, industries, and other categories.

Portfolios

A collection of different types of investments (such as stocks, bonds, commodities, etc.) that an individual or institution holds.

Unsystematic Risk

The risk associated with a specific company or industry, which can be mitigated through diversification.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to reduce exposure to any single asset or risk.