A 10% increase in the price of pizza causes a 10% drop in the quantity of both pizza and beer sold. Describe elasticities and the nature of the two products.
a. The price elasticity of demand for pizza is equal to 1 and the cross price elasticity of beer with respect to the price of pizza is also 1. In this example, beer and pizza complements.
b. The price elasticity of demand for pizza is equal to 1 and the cross price elasticity of beer with respect to the price of pizza is (-)1. In this example, beer and pizza complements.
c. The price elasticity of demand for pizza is equal to (-)1 and the cross price elasticity of beer with respect to the price of pizza is 1. In this example, beer and pizza complements.
d. The price elasticity of demand for pizza is equal to (-)1 and the cross price elasticity of beer with respect to the price of pizza is also (-)1. In this example, beer and pizza complements.
d. The price elasticity of demand for pizza is equal to (-)1 and the cross price elasticity of beer with respect to the price of pizza is also (-)1. In this example, beer and pizza complements.
The price elasticity of demand for pizza is equal to (-)1 and the cross price elasticity of beer with respect to the price of pizza is also (-)1. In this example, beer and pizza complements.
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What will be an ideal response?