Answer:
Splishy Splashy & Frizzles are substitute goods.
Splishy Splashy & Frizzles are complementary good, so frizzles is recommended to be marketed with splishy splashy
Explanation:
Substitute goods can be inter change - ably used to satisfy a particular want. Their price & demand are directly related, as price rise of one good makes other relatively good cheaper & its demand increases.
Complementary goods are jointly used to satisfy a particular want. Their price & demand is inversely related, as price rise of one good makes entire product combination expensive & other good's demand decreases.
Cross Price Elasticity :-
% change in quantity of a good / % change in price of other good
As substitutes price & demand are directly related, their cross price elasticity is positive. As complements price & demand are inversely related, their cross price elasticity is negative.
GIVEN : When the price of splishy splashies increases by 4%
- The quantity of frizzles sold decreases by 5%
- The quantity of mookies sold increases by 3%
Cross Price Elasticity [Splishy Splashies, frizzles] = - 5 / 4 = -1.25 [Negative] So these are substitutes
Cross Price Elasticity [splishy splashies & mookies] = 3/ 4 = 0.75 [Positive] So these are complements
Hence, Mookies are recommended to be marketed with splishy splashies
