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Chapter 4: Problem 4

Identify a good that is a substitute for one good and a complement for another. (Hint: A CocaCola may be a substitute for a Pepsi and a complement for a hamburger.

Short Answer

Expert verified
Pepsi serves as a substitute for CocaCola and a complement for Pizza in this scenario.

Step by step solution

01

Understanding Substitute and Complementary Goods

Firstly, it is important to know what Substitute and Complementary goods are. Substitute goods are those that can replace each other, meaning that if the price of one good goes up, the demand for its substitute will increase. On the other hand, Complementary goods are those that are used together. If the price of one good goes up, the demand for both goods decreases since they are generally consumed together.
02

Identification of Substitute Good

A substitute good could be Pepsi. Let's suppose it serves as a good substitution for CocaCola: if the price of CocaCola goes up, people might switch to Pepsi because it fulfills the same need or desire and is relatively cheaper than CocaCola.
03

Identification of Complementary Good

A complementary good for Pepsi could be Pizza. The two goods (check for these in local food culture) are oftentimes consumed together. Thus, if the price of Pizza goes down, the demand for Pepsi might increase since people generally consume them together. Hence, in this example, Pepsi serves as both a substituting good for CocaCola and a complementary good for Pizza.

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Most popular questions from this chapter

State the law of demand.

Yesterday the price of a good was \(\$ 10,\) and the quantity demanded was 100 units. Today the price of the good is \(\$ 12\) and the quantity demanded is 87 units. Did quantity demanded fall because the price increased, or did the price rise because quantity demanded fell?

Does an increase in price necessarily bring about a higher total revenue?

Explain what it means if demand increases.

Define: a. normal good b. inferior good c. substitute d. neutral good e. complement
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