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Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gummies decreases by 5%, the quantity of frizzles sold increases by 4% and the quantity of mookies sold decreases by 6%. Your job is to use the cross-price elasticity between guppy gummies and the other goods to determine which goods your marketing firm should advertise together.

Respuesta :

Answer:

guppy gummies and frizzles are complementary goods and should be advertised together

Explanation:

Cross price elasticity of demand measures the responsiveness of quantity demanded of good A to changes in price of good B.

If cross price elasticity of demand is positive, it means that the goods are substitute goods.

Substitute goods are goods that can be used in place of another good.

When the price of gummies decreased, the demand for mookies decreased. these goods are substitutes and should not be advertised together

If the cross-price elasticity is negative, it means that the goods are complementary goods.

Complementary goods are goods that are consumed together

When the price of gummies decreased, the demand for frizzles increased. the cross price elasticity would be negative. thus they are complements and should be advertised together.

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