Question:
Goods are substitutes when an increase in price of one leads to of other commodity
Goods are substitutes when an increase in price of one leads to of other commodity
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For substitute goods, price of one good and demand for the other good move in the same direction.
Updated On: May 22, 2026
- a decrease in demand
- no change in demand
- a decrease in price
- an increase in demand
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The Correct Option is D
Solution and Explanation
Concept: Substitute goods are those goods which can be used in place of each other. Examples include tea and coffee, Coke and Pepsi, butter and margarine.
Step 1: Understanding substitute goods.
If two goods are substitutes, then when the price of one good rises, consumers shift to the other good. \[ \text{Price of Good X rises} \Rightarrow \text{Demand for Good Y rises} \]
Step 2: Applying the concept.
Suppose tea and coffee are substitutes. If the price of tea increases, many consumers will reduce tea consumption and increase coffee consumption. \[ P_{\text{tea}} \uparrow \Rightarrow D_{\text{coffee}} \uparrow \]
Step 3: Choosing the correct option.
The question asks what happens to the demand of the other commodity. Since substitute goods move in this way, demand for the other commodity increases. Therefore, the correct answer is an increase in demand.
Step 1: Understanding substitute goods.
If two goods are substitutes, then when the price of one good rises, consumers shift to the other good. \[ \text{Price of Good X rises} \Rightarrow \text{Demand for Good Y rises} \]
Step 2: Applying the concept.
Suppose tea and coffee are substitutes. If the price of tea increases, many consumers will reduce tea consumption and increase coffee consumption. \[ P_{\text{tea}} \uparrow \Rightarrow D_{\text{coffee}} \uparrow \]
Step 3: Choosing the correct option.
The question asks what happens to the demand of the other commodity. Since substitute goods move in this way, demand for the other commodity increases. Therefore, the correct answer is an increase in demand.
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