Question

substitutes, complements, or unrelated

Answer 1

Solution -

You work for a marketing firm that has just landed a contract with Run­of­the­Mills to help them promote three oftheir products: splishy splashies, flopsicles, and cannies. All of these products have been on the market for sometime, but, to entice better sales, Run­of­the­Mills wants to try a new advertisement that will market two of theproducts that consumers will likely consume together. As a former economics student, you know that complementsare typically consumed together while substitutes can take the place of other goods.Run­of­the­Mills provides your marketing firm with the following data: When the price of splishy splashies increasesby 2%, the quantity of flopsicles sold increases by 6% and the quantity of cannies sold decreases by 1%. Your job isto use the cross­price elasticity between splishy splashies and the other goods to determine which goods yourmarketing firm should advertise together.