An increase
in the price of a substitute
good Y will lead to
A.
an inward 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 outward shift in the supply of good X.
B. an inward shift in the demand for good X.
something isn't right
I apologize for the confusion. You are correct, my previous response was incorrect.
An increase in the price of a substitute good Y will actually result in an outward shift in the demand for good X. This is because when the price of a substitute good increases, consumers are more likely to choose good X as an alternative, leading to an increase in demand for good X.
Therefore, the correct answer is C. an outward shift in the demand for good X.
Thank you for pointing out the mistake.
When the price of a substitute good, Y, increases, it is likely to cause a change in the demand for good X. The substitute good Y becoming more expensive makes consumers less inclined to purchase Y and more inclined to purchase good X instead. In this case, the correct answer would be option C: an outward shift in the demand for good X.
To determine the answer to this question, you need to understand the concept of substitute goods and their impact on the demand and supply of other goods.
Substitute goods are products that can be used as alternatives to one another. When the price of a substitute good increases, consumers tend to switch from the more expensive good to the relatively cheaper substitute. This substitution effect influences the demand and supply of the substitute good as well as the related goods.
In this case, we are interested in the impact of the price increase of substitute good Y on the demand and supply of good X. The answer options suggest different possibilities, so let's evaluate them one by one:
A. An inward shift in the supply of good X: This option implies that the price increase of the substitute good Y would affect the supply of good X. However, since the price change of a substitute good should not directly impact the supply of another good, this option is unlikely to be correct.
B. An inward shift in the demand for good X: This option suggests that the price increase of substitute good Y would lead to a decrease in the demand for good X. If the substitute good becomes more expensive, consumers are likely to prefer the relatively cheaper good X, leading to increased demand. Therefore, this option is also unlikely to be correct.
C. An outward shift in the demand for good X: This option indicates that the price increase of substitute good Y would lead to an increase in the demand for good X. This is the expected outcome when the price of a substitute good rises. Consumers tend to switch from the more expensive substitute to the relatively cheaper good, causing an increase in demand for the latter. Therefore, this option seems to be the correct answer.
D. An outward shift in the supply of good X: This option suggests that the price increase of substitute good Y would affect the supply of good X. However, the price change of a substitute good should not directly impact the supply of another good. Therefore, this option is unlikely to be correct.
Based on the explanation above, the correct answer is C. An outward shift in the demand for good X.