In order to prove that Dr. Pepper and 7-Up are substitutes, the FTC should test the ____ and get a ____.
A) price elasticity of demand; number less than 1
B) income elasticity; positive number
C) price elasticity; negative number
D) price elasticity of demand; number greater than 1
E) cross-price elasticity; positive number

Question

Quizplus · Accepted Answer

The FTC should test the cross-price elasticity of demand between Dr. Pepper and 7-Up, which will show how a change in the price of one affects the demand for the other. If the cross-price elasticity is a positive number, it indicates that the two products are substitutes, meaning a rise in the price of one will lead to an increase in demand for the other.

In Order to Prove That Dr