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

Question

Quizplus · Accepted Answer

To prove that Dr. Pepper and 7-Up are substitutes, economists should test the cross-price elasticity, which measures the responsiveness of the quantity demanded of one good to a change in the price of another good. If the cross-price elasticity between Dr. Pepper and 7-Up is positive, it indicates that they are substitutes, as an increase in the price of one would lead to an increase in the demand for the other. A negative cross-price elasticity would indicate that they are complements, as an increase in the price of one would lead to a decrease in the demand for the other. A zero cross-price elasticity would indicate that they are unrelated goods, as a change in the price of one would have no effect on the demand for the other.

In Order to Prove That Dr