Coke and Pepsi probably have a:
A) less elastic cross-price elasticity of demand than do Coke and bananas.
B) cross-price elasticity of demand that is smaller than do Coke and bananas.
C) negative cross-price elasticity of demand.
D) more elastic cross-price elasticity of demand than do Coke and bananas.

Question

Quizplus · Accepted Answer

The question is asking which pair has a more elastic cross-price elasticity of demand. Elasticity measures the responsiveness of demand to changes in price. So, if the cross-price elasticity of demand is more elastic, it means that a small change in the price of a related good (such as bananas) will lead to a larger change in the consumption of the original good (such as Coke and Pepsi). Therefore, the answer is D, because if Coke and Pepsi have a more elastic cross-price elasticity of demand than do Coke and bananas, it means that people are more likely to switch between Coke and Pepsi in response to changes in price.

Coke and Pepsi Probably Have A