Question

13.

which of the following will increase demand for Coke?

Group of answer choices

a decrease in the price of Coke.

an increase in the price of Coke.

an increase in the price of Pepsi.

not sure which?

14.

In a competitive market, equilibrium price will result in:

Group of answer choices

quantity supplied = quantity demanded

quantity supplied > quantity demanded

quantity supplied < quantity demanded

I'm getting a little hungry right about now.

Answer 1

Cross-price elasticity of demand= % change in the quantity demand/ % change in the price

When the cross-price elasticity demand sign is positive, then both goods will be substitute goods.

The price of substitute goods and demand for its substitute goods are positively related.

When the cross-price elasticity demand sign is negative, then both goods will be complementary goods

The price of complement goods and demand for its complement goods are negatively related.

Since coke and pepsi are substitute goods.

Hence when there is an increase demand for coke, it means price of has must have increased, so the pepsi becomes less attractive, so people start substituting pepsi for coke.

Hence option third is the correct answer.

14.

In the perfect market, equilibrium is determined by the equality of the market demand and market supply curve. At the intersection of the demand and supply curve market gets cleared because demand is equal to the supply.

Hence it can be said that in a competitive market, equilibrium price will result in quantity supplied = quantity demanded.

Hence option first is the correct answer.