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Question 1 When the price per carton of Cola falls from RM16 to RM14, the quantity demanded increases from 200 to 300 cartons per month.

Question 1

When the price per carton of Cola falls from RM16 to RM14, the quantity demanded increases from 200 to 300 cartons per month. On the other hand, the demand for Pepsi falls from 250 to 200 cartons per month.

Required:

a. Calculate the price elasticity of demand using the midpoint formula.

b. Calculate the cross-elasticity of demand between Cola and Pepsi. Based on the answer, explain the relationship between the two.

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