ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A bumper crop of cotton lowers the price of cotton clothing. Sales of silk shirts decrease.
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As laptop computer sales increase, so do the sales of computer cases.
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An automobile maker lays off thousands. Sales of electronic goods in that city fall.
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Hi-tech companies lure people to a region. Demand for housing rises.
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Detailed explanation-1: -Which statement is an example of substitute goods affecting demand? A bumper crop of cotton lowers the price of cotton clothing.
Detailed explanation-2: -Butter and margarine are classic examples of substitute goods.” If someone doesn’t have access to a car they can travel by bus or bicycle. Buses or bicycles, therefore, are substitute goods for cars. Substitute goods are two or more products that the consumer can use for the same purpose.
Detailed explanation-3: -A substitute product is one that serves the same purpose as another product in the market. Getting more of one commodity allows a consumer to demand less of the other product. The demand for substitute products shows a negative correlation. That is, consumption of one product reduces or replaces the need for the other.
Detailed explanation-4: -A decrease in the price of substitute goods leads to an decrease in the demand for given commodity and vice versa. Eg., if price of a substitute good (say coffee) decreases, then demand for given commodity (say tea) will fall, so demand for a given commodity is directly affected by change in price of substitute goods.