Question

10. If the price of Pepsi increases, and the demand for Sprite increases as a result, which of the following is true? (1 point)

a. Pepsi is an inferior good and Sprite is a normal good

b. Pepsi and Sprite are complements

c. Pepsi is a normal good and Sprite is an inferior good

d. Pepsi and Sprite are substitutes

e. The law of demand has been violated

11. If you discover that both the equilibrium price and quantity of peas has risen, what would you conclude? (Hint : Try drawing the situations) ( 2 points ) a. Demand has decreased with supply remaining the same

b. Supply has decreased with demand remaining the same

c. Demand has increased with supply remaining the same

d. Supply has increased with demand remaining the same

12. Now suppose you find that you made a mistake. The equilibrium price and quantity of peas has actually fallen. What would you conclude now? (1 points ) a. Demand has decreased with supply remaining the same

b. Supply has decreased with demand remaining the same

c. Demand has increased with supply remaining the same

d. Supply has increased with demand remaining the same.

Answer 1

10.Ans: d)  Pepsi and Sprite are substitutes

Explanation:

When the cross elasticity of demand is positive , then the two related goods are substitute goods. It means when the price of one good increases then the demand for other related good will increase and vice versa.

So , If the price of Pepsi increases, and the demand for Sprite increases as a result , Pepsi and Sprite are substitutes.

11.Ans: c) Demand has increased with supply remaining the same.

Explanation:

When demand increases and supply remains same,then only the demand curve will shift to the right. As result , both the equilibrium price and the quantity will increase.

12.Ans: a) Demand has decreased with supply remaining the same

Explanation:

When demand increases and supply remains same,then only the demand curve will shift to the left . As result , both the equilibrium price and the quantity will decrease.