Question

Assume the price of coke decreases. Coke & Pepsi are substitutes.

A. The demand for Pepsi increases

B. The demand for Pepsi decreases

C. The quantity demanded of Pepsi increases

D. The quantity demanded of Pepsi decreases

Answer 1

Before solving this question we need to understand the difference between quantity demanded and demand

When the factor present is only price then there is change in the quantity demanded

This is shown by the movement on the demand curve

The movement can be either upward or downward

If more than price factors are involved like

• income level of consumers
• presence of substitutes and complements in the market
• expectation level of consumers
• taste and preferences

Then this will cause the shift of demand curve

Now from the given question as it is clearly given that Coke and Pepsi are substitutes to each other

Substitutes are those goods which can replace each other

So here when price of coke decreases then this will lead to to increase in the demand of coke and ultimately decreasing the demand of Pepsi

Hence the correct answer here is option B