Acka: Student Queston Mat Elasticity and Its Application (Mobile-Enabled) Graded

Question

Acka: Student Queston Mat Elasticity and Its Application (Mobile-Enabled) Graded Assignment | Read Chapter 5 | Back to Assignment Due Sunday 01.28 18 at 1145 P Attempts: 0.8 8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the Mils to help them promote three of the advertisement that will market two of the products that consumers will Skely consume together. As a Keep the Highest: 0.8/1 penguin patties, cannies. All of these products have been on the macket for some time, but, to entice better sales, Run-of the-Mills wants to try a new former economics student, you know that are typically consumed together while substitutes can take the place of other goods. Run-of-the-Hills provides your marketing firm with the folowing data: when the price of penguin patties decreases by increases by 5% and the quantity of cannies sold deceases by SN. Your job is to use the cross price elasticity between pengin patties and the other goods to determine which goods your marketing firm should advertise together. 4%, the quantity of raskels sold Complete the first column of the following table by computing the cross-price elastoty between peng parties and raskels, and then between penguin patties and cannies. In the second column, determine if penguin patties are a complement to or a substitute for euch of the goods listed Finally, complete the final column by indicating which good you should recommend marketing with penguin paties Relative to Penguin Patties Complement or Substitute Recommend Marketing with Penguin Patties Cross Price Elasticity of Demand Raskels Cannies Contnue without saving

Explanation / Answer

Cross price elasticity of demand = % change in quantity demanded (good 1)/% change in price (good 2)

Raskels:

CPE = 5%/-4% = -1.25

Since CPE is negative, Raskels are complements.

Yes, they should be recommended for marketing with Penguin Patties.

Cannies:

CPE = - 5%/- 4% = 1.25

Since CPE is positive, Cannies are substitutes.

No, they should not be recommended for marketing with Penguin Patties.

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