We would expect the cross elasticity of demand between Pepsi and Coke to be
A)positive, indicating normal goods.
B)positive, indicating inferior goods.
C)positive, indicating substitute goods.
D)negative, indicating substitute goods.

Question

Quizplus · Accepted Answer

The cross elasticity of demand between Pepsi and Coke is positive because they are substitute goods. When the price of one increases, the demand for the other increases as consumers switch to the cheaper alternative.

We Would Expect the Cross Elasticity of Demand Between Pepsi