Use the Information Below to Answer the Following Questions

question 128

Multiple Choice

Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium.Pepsi is a substitute for coffee;cream is a complement of coffee.Consider the market for coffee.Assume that all ceteris paribus assumptions continue to hold except for the event listed.
-Refer to Fact 3.5.1.An increase in the price of Pepsi,a substitute for coffee will

• A)increase the price and the quantity demanded of coffee.
• B)increase the price and the quantity supplied of coffee.
• C)decrease the price and the quantity demanded of coffee.
• D)decrease the price and the quantity supplied of coffee.
• E)cause none of the above.

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Definitions:

Perfectly Inelastic

Describes a situation in demand or supply where the quantity demanded or supplied does not change in response to a price change.

Demand Schedule

A table that shows the quantity of a good that consumers are willing to buy at different prices.

Parallel

Lines or paths that remain the same distance apart at every point, never meeting or intersecting.

Elasticity Coefficient

A numerical value that measures the responsiveness of the quantity demanded or supplied of a product to a change in one of its determinants, such as price or income.