8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the

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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 1 (37.18 KiB) Viewed 23 times

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: splishy splashies, raskels, and cannies. 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 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 splishy splashes decreases by 1%, the quantity of raskels sold decreases by 18% and the quantity of cannies sold increases by 3%. Your job is to use the cross-price elasticity between splishy splashies and the other goods to determine which goods your marketing firm should advertise together ito Complete the first column of the following table by computing the cross-price elasticity between plehy splashes and raskels, and then between spistry Splashies and cannies. In the second column, determine if splahy splashes 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 splahy splashes Relative to Splishy Splashes Cross-Price tasticity of Demand Complement or Substitute Recommend Marketing with Splishy Splashes Raskels Cannes Grade It Now Save & Continue Continue without saving