If Pepsi goes on sale and decreases its price by 10 per cent and, as a result, the quantity demanded of Coca Cola decreases by 5 per cent, then Pepsi and Coke are ________ goods.
A) normal
B) substitute
C) inferior
D) unrelated
E) complementary

Question

Quizplus · Accepted Answer

Pepsi and Coca Cola are substitute goods, as a decrease in the price of Pepsi leads to a decrease in the demand for Coca Cola. This indicates that consumers view the two products as substitutes for each other and are willing to switch between the two based on price changes.

If Pepsi Goes on Sale and Decreases Its Price by 10