ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The demand for good X will increase.
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The market price of good X will decrease.
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The demand for good X will decrease.
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The demand for good X will not change.
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Detailed explanation-1: -With increase in the price of the substitute of Good-X, demand curve of Good-X will shift to the right. Accordingly equilibrium price and quantity of Good-X would tend to increase.
Detailed explanation-2: -Note that as the price of good X increases, the quantity demanded of good X decreases.
Detailed explanation-3: -The demand for a good increases, if the price of one of its substitutes rises. The demand for a good decreases, if the price of one of its substitutes falls.
Detailed explanation-4: -Therefore, due to the increase in the price of substitute good Y, the equilibrium price of X will rise and equilibrium output of X will also be higher.
Detailed explanation-5: -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.