An increase
in the price of a substitute
good Y will lead to
A.
an outward shift in the supply of good X.
B.
an inward
shift in the demand for good X.
C.
an outward
shift in the demand for good X.
D.
an inward shift in the supply of good X.
C. an outward shift in the demand for good X.
The correct answer is C. an outward shift in the demand for good X.
When the price of a substitute good Y increases, consumers tend to switch their purchases from the now more expensive good Y to the relatively cheaper good X. This increase in demand for good X leads to an outward shift in the demand curve for X. As a result, the quantity demanded for good X increases, leading to an increase in both the price and quantity of good X in the market.