If Two Goods Are Substitutes,then an Increase in the Price

question 23

Multiple Choice

If two goods are substitutes,then an increase in the price of one will cause:

• A) a leftward shift of the demand curve for the other good.
• B) a rightward shift of the demand curve for the other good.
• C) a movement up and to the left along the demand curve for the other good.
• D) a movement down and to the right along the demand curve for the other good.

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the prices of goods, leading consumers to replace more expensive items with cheaper alternatives.

Demand

The desire and ability of consumers to purchase goods and services at different prices, reflecting how much of a product consumers are willing and able to buy.

Surge Prices

A dynamic pricing strategy that increases prices in response to high demand and limited supply, commonly used in ride-sharing services.

Determinants of Market Demand

Factors that influence the total demand for a product or service in a market, including price, income levels, tastes, and population demographics.