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

Question

Quizplus · Accepted Answer

When the price of Pepsi decreases, the quantity demanded of Coca Cola decreases, suggesting that they are substitute goods. Substitute goods are products that can be used in place of each other, such as Coke and Pepsi. When the price of one decreases, the demand for the other decreases. This is in contrast to complementary goods, which are products that are typically used together, such as peanut butter and jelly or hot dogs and buns. If the price of one increases, the demand for the other will decrease. Thus, the best choice is C, substitute goods.

If Pepsi Goes on Sale and Decreases Its Price by 10