ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -c. The option is not true as when the price of butter rises, there will be no excess supply of butter as the demand for butter will decrease due to the rise in its price. Therefore, as the demand curve shifts leftwards, the equilibrium quantity of butter will decrease.

Detailed explanation-2: -Butter and margarine are substitute goods for most people. Therefore, an increase in the price of margarine will cause people to increase their consumption of butter, thereby shifting the demand curve for butter out from D1 to D2 in Figure 2.2.

Detailed explanation-3: -Answer and Explanation: If the price of margarine decreases then the demand for butter decreases and the supply of margarine increases because margarine is the substitute for butter. The equilibrium price and quantity of butter would decrease.

Detailed explanation-4: -If demand for goods decreases, then demand curve shifts to the left. Margarine is a substitute for butter, so if the price of butter increases, consumers’ demand for butter falls, and consumers’ demand for margarine increases( since margarine is a substitute for butter).

Detailed explanation-5: -If butter’s price fall, then the consumers will consume more quantities of butter. As a result, the consumers will reduce their consumption of margarine leading to a decline in demand. A reduction in demand for margarine is shown by the leftward change in the demand curve for margarine.