ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an increase in the price of good X will lead to a decrease in the price of good Y.
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an increase in the price of good X will lead to a decrease in the supply of good Y.
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a decrease in the price of good X will lead to an increase in the demand for good Y.
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a decrease in the price of good X will lead to an increase in the quantity transacted of good Y.
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Detailed explanation-1: -X and Y being substitute goods, if the price of Y increases, then it will reduce the demand for Y and people will switch to X, which will raise the demand for X. Thus, the demand curve will shift from D1D1 to D2D2 . At the existing price P1, there will be an excess demand.
Detailed explanation-2: -If the price of Good X increases, the demand for Good Y will increase. If the price of the X (substitute good) rises, then demand for X will fall. As X and Y are substitute goods, so the demand for Y will increase since it is a cheaper good now. This shifts the initial demand curve for Y parallelly rightwards.
Detailed explanation-3: -Solution : (i) Goods x and y are complementary goods as with fall in price of x, demand for good y rises. <br> (ii) Goods x and y are substitute goods as with the fall in price of x, demand for good y also falls. Step by step solution by experts to help you in doubt clearance & scoring excellent marks in exams.
Detailed explanation-4: -Question: The price of a good X rises, causing the demand for good Y to fall. The two goods are therefore substitutes.