According to the law of demand an increase in the price of Pepsi will (ceteris paribus):?

Question

A)increase the quantity demanded of Pepsi.
B)decrease the quantity demanded of Pepsi.
C)increase the demand for Pepsi.
D)decrease the demand for Pepsi.

Answer 1

D)decrease the demand for Pepsi.

Answer 2

ceteris paribus means all other things being equal. The law of demand says that demand curves point downwards (have negative slope) -- when prices become greater people want less of something.

Thus the answer is D if nothing else changed except the price of pepsi increased people would want more.

Its worth recognizing that in some real-world cases raising the price can actually raise sales. The reason is that people in the real world have imperfect information about the good that they buy (they don't know everything that there is to know about the product that they're buying). Sometimes people will use price as an indicator of quality, and so sometimes raising the price will signal to people that they are paying for something of higher waulity that is worth more.

However, the example says "ceteris paribus" meaning that all things beside the price are equal. This is meant to include the information people have about the product in making their decision. Thus the answer is correctly D.

If you want to really impress your professor/teacher you might add -- (assuming that the good is not a Giffen good which you can read more about at the wikipedia link below)

Answer 3

B)decrease the quantity demanded of Pepsi.
Note:
A xteristic of demand is: All else equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. There is an inverse relationship between price and quantity demanded (Law of demand).

Answer 4

I vote to kill all forms of pop.. It rots your teeth,weakens your bones and encourages caffeine addictions.
Who needs it.

Answer 5

d

Answer 6

B