The cross-price elasticity of demand for demand is negative, as they must be complementary goods.
Cross-price Elasticity of Demand
The cross-price elasticity of demand helps to determine the relationship between two commodities when their prices change over time. It measures the change in demand for one product due to the fall or rise in the price of the other product.
Positive Cross-price elasticity of Demand
When the cross-price elasticity of demand is positive then the demand for one good increases when the price of the other good goes up. This relationship between two products is known as a substitute.
Negative Cross-price elasticity of Demand
When the cross-price elasticity of demand is negative then the demand for one good decreases when the price of the other good goes up. This relationship between two products is known as complementary.
Hence, in the given question the relationship between soda and pretzels is complementary as the cross-price elasticity of demand is negative.
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