"Because Coke and Pepsi Are Substitutes,a Decrease in the Price

question 214

Multiple Choice

"Because Coke and Pepsi are substitutes,a decrease in the price of Pepsi will cause the demand for Coke to decrease.This initial shift in demand for Coke results in a lower price for Coke; this lower price will cause the demand curve for Coke to shift to the left." Which of the following correctly comments on this statement?

• A)The statement will be true if consumer tastes for Coke and Pepsi do not change.
• B)The statement is false because a change in the price of Coke would not change the demand for Coke.
• C)The statement is false because Pepsi is an inferior good; Coke is a normal good.
• D)The statement is false because one cannot assume that Coke and Pepsi are substitutes for all consumers.

---

Definitions:

Replacement Cost

The current cost of replacing an asset with a new asset of similar kind and quality, often used in insurance and accounting.

Cost Of Completion

The estimated expenses that are yet to be incurred to complete an ongoing project or to bring an asset to its intended use.

Market Value

The present cost at which a service or asset is available for purchase or sale in a market setting.

Replacement Cost

The current cost to replace an asset with a similar one of equivalent utility and quality, without considering depreciation.