Question

If products C and D are close substitutes, an increase in the price of C will:

Multiple Choice

• tend to cause the price of D to fall.

• shift the demand curve of C to the left and the demand curve of D to the right.

• shift the demand curve of D to the right.

• shift the demand curves of both products to the right.

Answer 1

Substitutes are those products which are a replacement for each other.

for example tea and coffee.

if the price of one good increases then quantity demanded of others also increases and vice versa.

Also if there is an increase of price in C then it will shift the demand curve of D to the right due to more quantity demand of D.