You are the manager of a supermarket,and you know that the cross-price elasticity of peanut butter to jelly is exactly -2.0.Because of a bad grape harvest,grape jelly prices are expected to rise by 10% next year.To account for the change in demand,you should stock 10% more peanut butter.

Question

Quizplus · Accepted Answer

The cross-price elasticity of -2.0 indicates that peanut butter and jelly are complements. A 10% increase in the price of jelly would lead to a 20% decrease in the demand for peanut butter, not an increase.

You Are the Manager of a Supermarket,and You Know That