ECONOMICS (CBSE/UGC NET)

ECONOMICS

MARKETS AND PRICES

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Suppose good X and good Y are in competitive demand. When the price of good X increases and the price of raw materials producing good Y decreases, the equilibrium quantity of good Y ____ .
A
will increase
B
will decrease
C
will remain unchanged
D
may increase, decrease or remain unchanged
Explanation: 

Detailed explanation-1: -When two goods X and Y are substitutes, then as the price of the substitute good Y rises, the demand for good X increases and the demand curve for good X shifts to the right, as in Figure (b).

Detailed explanation-2: -Question: The price of a good X rises, causing the demand for good Y to fall. The two goods are therefore substitutes.

Detailed explanation-3: -In the given question, two goods X and Y are substitute goods. 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.

Detailed explanation-4: -As the price of Product X decreases, the demand curve for Product Y shifts to the right. X and Y are complementary goods. Good X and Good Y are complementary goods. That is, these goods are used together.

There is 1 question to complete.