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Questions
If price of X increases, then demand for Y too increases. What is the relationship between goods X and Y? Give an example.
Substitute products A and B are produced by different firms. Give a reason why a change in the price of product A will bring about a change in quantity demanded for product B.
If the demand for a commodity Y increases as the price of another commodity X rises, what is the relation between the two goods?
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Solution
If the price of good X increases and as a result, the demand for good Y also increases, goods X and Y are substitutes.
Substitute goods are products that can be used in place of each other to satisfy the same need or want. When the price of one good (X) rises, consumers tend to switch to the alternative (Y), which is now relatively cheaper, increasing the demand for the substitute good.
Example:
Tea and Coffee: If the price of tea (good X) increases, some consumers may choose to buy more coffee (good Y) instead, leading to an increase in the demand for coffee. This is because tea and coffee are substitute goods that serve a similar purpose.
