Answer and Explanation:
According to the given situation, when the amount of splishy splashies decrease by 5%, quantity of frizzles increases by 4%.
So, The cross price elasticity of frizzles relative to splishy splashies = Percentage change in quantity demand for frizzles ÷ Percentage change in price for splishy splashies
= 4 ÷ -5
= -0.80
Now,
Cross-price elasticity between splishy splashies and kipples = Percentage change in quantity demand for Kipples ÷ Percentage change in price for splishy splashies
= -6% ÷ -5%
= 1.20
b. Since there is negative cross-price elasticity between splishy splashies and frizzles, these products are complementary.
The elasticity of the cross-price between splendid splashies and kipples is positive, these goods being substitutes.
c. Here, I would therefore recommend Raskels marketing, since these two are used together.
The required Table are as shown below:-
<u>Particulars Cross-Price Elasticity Complements Recommended </u>
<u> of Demand or Substitute Marketing with</u>
<u> splishy splashies</u>
Frizzles 0.80 Complements Yes
Kipples 1.20 Substitute No
