Suppose a person's utility is only a function of their consumption of diet soda and they do not care which brand,Diet Coke (DC)or Diet Pepsi (DP)they consume.Suppose further that .If PDC rises but it remains less than PDP then the consumption of DC
A)Falls from a positive amount to zero
B)Falls from a positive amount to another positive amount.
C)rises.
D)stays at zero.

Question

Quizplus · Accepted Answer

Since the person does not care about the brand and only cares about consuming diet soda, an increase in PDC (price of Diet Coke) but still being less than PDP (price of Diet Pepsi) would lead to a substitution effect. The person would switch from consuming Diet Coke to Diet Pepsi as it is now relatively cheaper compared to Diet Coke, leading to a fall in the consumption of Diet Coke from a positive amount to another positive amount.

Suppose a Person's Utility Is Only a Function of Their