McConnel Assume that Coca-Cola and Pepsi-Cola are substitutes. A fall in the pri
ID: 2439588 • Letter: M
Question
McConnel Assume that Coca-Cola and Pepsi-Cola are substitutes. A fall in the price of Coca-Cola will have which of t following effects on the market for Pepsi? A movement down along the Pepsi demand curve. A rightward shift in the Pepsi demand curve A movement up along the Pepsi demand curve A leftward shift in the Pepsi demand curve QUESTION 18 if the quantity of tickets to the fair sold decreases by 10 percent when the price increases by 12 percent, thep elasticity of demand over this range of the demand curve is: price elastic price inelastic perfectly elastic perfectly inelastic unitary elastic QUESTION 19 Which of the following statements is true? OTC = TFC-TVC AFC- ATC/Q O MC equals the change in ATC divided by the change in QExplanation / Answer
(D) A leftward shift in the pepsi demand curve.
Since, coca cola and pepsi cola are substitues, that means, any one of the two can be preferred by the consumer. The consumer is indifferent between both the products. Now, when the price of coca cola falls, demand for coca cola will rise. People will now demand less of the expensive products, i.e., pepsi cola and demand more of the cheap product, i,e, coca cola. Thus, demand for pepsi cola falls and the demand curve shifts leftwards.
(B) Price inelastic.
Price elasticity of demand = Change in quantity / change in price
= 10 / 12
= 0.8
Thus, when elasticity is < 1, there is price inelasticity.