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In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. An increase in the price of a product that is a close substitute for X will_____________.

A) decrease S, increase P, and decrease Q.
B) increase S, increase P, and increase Q.
C) decrease S, decrease P, and decrease Q
D) increase D, increase P, and increase Q.

Respuesta :

Answer:

D) increase D, increase P, and increase Q.

Explanation:

A close substituite is a good that can be used in place of another good due to the similarity between the two goods.

If the price of good a substitute increases, it becomes more expensive to consumers and they shift demand to good X, the demand for good X increases, the equilibrium price and quantity would increase.

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Answer:

D) increase D, increase P, and increase Q.

Explanation:

An increase in the price of a product that is a close substitute for X will make consumers to react and begin to purchase more of Commodity X which will also give them the same satisfaction. This in turn will increase demand (D) for X, and from law of demand > Increase in demand, will increase price. So, price (P) increase, and eventually it will increase equilibrium quantity Q of X.

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