After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from
A)0.9 to 0.5.
B)0.9 to 1.5.
C)−0.5 to −0.2.
D)−0.9 to −1.5.

Question

Quizplus · Accepted Answer

Cross elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. A decrease from 0.9 to 0.5 indicates that the products have become less substitutable, suggesting the ad campaign successfully differentiated Coke from Pepsi, making consumers less likely to switch to Pepsi if Coke's price increases.

After a $5 Million Ad Campaign, Coca-Cola Measured Its Effectiveness