Refer to Table 2.2,which presents hypothetical data on cross-price elasticity of demand estimates.Which goods are the best substitutes?
A) Coke and Pepsi
B) Hard Liquor and Beer
C) Beef and Chicken
D) Cheese and Butter

Question

Refer to Table 2.2,which presents hypothetical data on cross-price elasticity of demand estimates.Which goods are the best substitutes? 
A) Coke and Pepsi 
B) Hard Liquor and Beer 
C) Beef and Chicken 
D) Cheese and Butter

Quizplus · Accepted Answer

Coke and Pepsi have a cross-price elasticity of demand coefficient of -1.3, which suggests that they are relatively good substitutes for each other. The more negative the coefficient, the greater the degree of substitution between the two goods. Therefore, A is the correct choice, as it shows the highest negative value.