Patrick lives near two petrol stations, Caltex and Shell. If Caltex decreases the price of petrol, we predict that the quantity of petrol demanded at Shell will
A) decrease because Caltex and Shell petrol are substitutes.
B) decrease because Caltex and Shell petrol are complements.
C) increase because Caltex and Shell petrol are substitutes.
D) increase because Caltex and Shell petrol are complements.
E) not change because Caltex and Shell are different brands of petrol.

Question

Quizplus · Accepted Answer

Caltex and Shell petrol are substitutes, meaning that they can be used in place of each other; if the price of Caltex petrol decreases, consumers may switch to buying petrol from Caltex instead of Shell, leading to a decrease in demand for Shell petrol.

Patrick Lives near Two Petrol Stations, Caltex and Shell