Homework (Ch 05) udy Tools
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: penguin patties,
raskels, and mookies. 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.
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Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties increases by 2%, the quantity of raskels sold
increases by 6% and the quantity of mookies sold decreases by 1%. Your job is to use the cross-price elasticity between penguin patties and the other
goods to determine which goods your marketing firm should advertise together.
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Complete the first column of the following table by computing the cross-price elasticity between penguin patties and raskels, and then between
penguin patties and mookies. In the second column, determine if penguin patties 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 penguin patties.
inciples of
Relative to Penguin Patties
Cross-Price Elasticity of Demand Complement or Substitute
Recommend Marketing with Penguin Patties
Raskels
Mookies
ck
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