ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good compared to that of other substitute goods. For example, when the price of a good rises, it becomes more expensive relative to other goods in the market.

Detailed explanation-2: -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.

Detailed explanation-3: -A. An increase in the price of a substitute is correct because the substitute goods have a positive price elasticity of demand. Therefore, when the price of substitute goods rises, it causes the demand to rise which can be depicted by a rightward shift in the demand curve. B.

Detailed explanation-4: -A change in quantity demanded is represented as a movement along a demand curve. The proportion that quantity demanded changes relative to a change in price is known as the elasticity of demand and is related to the slope of the demand curve.

Detailed explanation-5: -What Is the Substitution Effect? The substitution effect is the decrease in sales for a product that can be attributed to consumers switching to cheaper alternatives when its price rises.