An increase in the price of Pepsi (a substitute for coffee)
A) raises the price of coffee and increases the quantity demanded of coffee.
B) raises the price of coffee and increases the quantity supplied of coffee.
C) lowers the price of coffee and decreases the quantity demanded of coffee.
D) lowers the price of coffee and decreases the quantity supplied of coffee.
E) causes none of the above.

Question

Quizplus · Accepted Answer

An increase in the price of Pepsi, a substitute for coffee, would lead to an increase in the demand for coffee as consumers switch to coffee. This increased demand raises the price of coffee, which in turn increases the quantity supplied of coffee.

An Increase in the Price of Pepsi (A Substitute for Coffee)