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8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gumdrops, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gumdrops decreases by 8%, the quantity of frizzles sold decreases by 6% and the quantity of kipples sold increases by 8%. Your job is to use the cross-price elasticity between guppy gumdrops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity between guppy gumdrops and frizzles, and then between guppy gumdrops and kipples. In the second column, determine if guppy gumdrops are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which goo commend marketing with guppy gumdrops. Complement Frizzles Kipples Relative to Guppy Gum Cross-Price Elasticity of Demand Com Substitute bstitute Recommend Marketing with Guppy Gumdrops

8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gumdrops, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gumdrops decreases by 8%, the quantity of frizzles sold decreases by 6% and the quantity of kipples sold increases by 8%. Your job is to use the cross-price elasticity between guppy gumdrops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity between guppy gumdrops and frizzles, and then between guppy gumdrops and kipples. In the second column, determine if guppy gumdrops are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which goo commend marketing with guppy gumdrops. Complement Frizzles Kipples Relative to Guppy Gum Cross-Price Elasticity of Demand Com Substitute bstitute Recommend Marketing with Guppy Gumdrops

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter6: Simple Pricing
Section: Chapter Questions
Problem 7MC
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8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gumdrops, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gumdrops decreases by 8%, the quantity of frizzles sold decreases by 6% and the quantity of kipples sold increases by 8%. Your job is to use the cross-price elasticity between guppy gumdrops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity between guppy gumdrops and frizzles, and then between guppy gumdrops and kipples. In the second column, determine if guppy gumdrops are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which goo commend marketing with guppy gumdrops. Complement Frizzles Kipples Relative to Guppy Gum Cross-Price Elasticity of Demand Com Substitute bstitute Recommend Marketing with Guppy Gumdrops
Transcribed Image Text:8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gumdrops, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gumdrops decreases by 8%, the quantity of frizzles sold decreases by 6% and the quantity of kipples sold increases by 8%. Your job is to use the cross-price elasticity between guppy gumdrops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity between guppy gumdrops and frizzles, and then between guppy gumdrops and kipples. In the second column, determine if guppy gumdrops are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which goo commend marketing with guppy gumdrops. Complement Frizzles Kipples Relative to Guppy Gum Cross-Price Elasticity of Demand Com Substitute bstitute Recommend Marketing with Guppy Gumdrops
Complete the first column of the following table by computing the cross-price elasticity between guppy gumdrops and frizzles, and then between guppy gumdrops and kipples. In the second column, determine if guppy gumdrops are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which good you should recommend marketing with guppy gu Frizzles Kipples Relative to Guppy Gumdrops Cross-Price Elasticity of Demand Complement or Substitute Recommend Marketi Yes No Guppy Gumdrops
Transcribed Image Text:Complete the first column of the following table by computing the cross-price elasticity between guppy gumdrops and frizzles, and then between guppy gumdrops and kipples. In the second column, determine if guppy gumdrops are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which good you should recommend marketing with guppy gu Frizzles Kipples Relative to Guppy Gumdrops Cross-Price Elasticity of Demand Complement or Substitute Recommend Marketi Yes No Guppy Gumdrops
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