00:01
Looking at four different sets of goods, we would like to know if these are compliments, substitutes, or unrelated to one another.
00:06
And if they are substitutes, are they perfect substitutes to some or all consumers? so for part a, looking at pepsi and coke, these here would be substitutes of one another.
00:17
And we know that because they're very similar.
00:19
So if the grocery store, say, was out of coke, well, someone might choose to buy pepsi.
00:23
However, what we know is that people tend to be really picky when it comes to pepsi and coke.
00:28
And so i wouldn't actually say that these would be perfect substitutes here because people tend to have very strong preferences for pepsi versus coca -cola.
00:38
And so they would be seen as substitutes in the sense maybe a better example would be instead of going to a grocery store, suppose you're at a restaurant.
00:44
And a restaurant is only offering either pepsi products or coca -cola products.
00:48
Well, if you wanted coke, but they only have pepsi, you'll probably still just, you'll probably be fine with pepsi.
00:53
You won't be thrilled, but you'll drink it anyways.
00:55
However, if you had the option, you would have chosen to have coca -cola.
00:58
Therefore they're not perfect substitutes of one another...