The market for coffee is initially in equilibrium with supply and demand curves of the usual shape. Pepsi is a substitute for coffee, cream is a complement for coffee. Questions 15-17 concern the market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event(s) listed. Answer each question without considering the others. A decrease in the price of Pepsi will A) increase the price of coffee and increase the quantity demanded of coffee. B) increase the price of coffee and increase the quantity supplied of coffee. decrease the price of coffee and decrease the quantity demanded of coffee. D) decrease the price of coffee and decrease the quantity supplied of coffee. E) none of the above.
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