Answer:
XED is 2
demand will likely be based on price
Explanation:
You want the XED for Coke and Pepsi, given that a decrease in price of Pepsi from $2 to $1.75 per liter causes demand for Coke to fall from 6,000 to 4500 liters.
XED
XED is the abbreviation for "cross-elasticity of demand." It is the ratio of the percentage change in the demand for one good to the percentage change in price for another.
XED = (∆Q/Q)/(∆P/P)
XED = ((4500 -6000)/(6000))/((1.75 -2.00)/(2.00)) = (2/6000)(-1500/-0.25)
XED = 2
The XED is positive for substitute goods, and negative for complementary goods (bought together).
Interpretation
The relatively large positive XED for Coke and Pepsi indicates these brands are nearly interchangeable. Consumers will tend to choose one over the other based on price. Apparently, the price of $1.75 per liter of Pepsi is sufficiently low to cause a switch from Coke.
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