Question

Ceteris paribus, if the price of Pepsi increases, the equilibrium price of Coca-Cola will , and the equilibrium quantity of Coca-Cola will O A. decrease; decrease O B. increase; increase OC. decrease; increase D. increase; decrease

Answer 1

Option (B) is correct.

Step-by-step explanation:

Here we are assuming that Pepsi and Coca-cola are substitutes goods.

We know that there is a positive relationship between the price and demand of substitute goods.

Now, if there is an increase in the price of the Pepsi then as a result demand for the coca-cola increases. This would shift the demand curve for coca-cola rightwards which means that both equilibrium price and equilibrium quantity increases in a market of Coca-cola.