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A restaurant sells salsa and guacamole, each of which can be eaten with the tacos that the restaurant sells. The manager of the restaurant is
A restaurant sells salsa and guacamole, each of which can be eaten with the tacos that the restaurant sells. The manager of the restaurant is not sure whether salsa and guacamole are substitutes or complements. However, after increasing the price of guacamole from $2.00 to $2.50, the manager notices that daily salsa sales rise by 5%.
What is the cross price elasticity of salsa and guacamole, and what can the manager conclude about their relationship?
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