Question

When the price of penguin patties decreases by 5%, the quantity of flopsicles sold increases by 4% and the quantity of mookies sold decreases by 5%. Your job is to use the cross-price elasticity between penguin patties and the other goods to determine which goods your marketing firm should advertise together.

Answer 1

Answer:

Penguin patties and mookies should be marketed together

Explanation:

The cross price elasticity of supply calculates the effect of the percentage change in quantity supplied on the percentage change in price

If the cross-price elasticity of supply is positive, it means that the goods are complementary goods.

Complementary goods are goods that are sold together  and they should be marketed together.

The decreases in price of penguin patties should lead to a decrease in supply for the complement good. Since the quantity of mookies sold decreases by 5%, they are complements and should be marketed with the penguin patties