Question

Give a reason for the following:

X and Y are substitute goods. A rise in price of X results in a rightward shift of the demand curve of Y.

Answer 1

X and Y are interchangeable items. The demand curve for Y shifts to the right when the price of X increases because substitute items are those that meet the same kind of need and can, therefore, be employed in lieu of one another to meet the specified want. Because they can be substituted for one another, if the price of good X increases, the consumer will switch his demand from X to Y.