📚 Learning Guide
Substitutes and Complements in Economics
medium

If the price of potatoes increases significantly, what is the most likely outcome for corn, a substitute good?

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Choose the Best Answer

A

Demand for corn will increase as consumers seek alternatives.

B

Demand for corn will decrease since potatoes are now more expensive.

C

Demand for corn will remain unchanged since they are not directly related.

D

Demand for corn will increase only if its price decreases.

Understanding the Answer

Let's break down why this is correct

Answer

When the price of potatoes goes up a lot, people often look for other options to buy instead of potatoes. Corn is a substitute good, which means that if potatoes are too expensive, more people will choose to buy corn instead. This increased demand for corn will likely cause its price to rise as well because more customers want it. For example, if potatoes are usually $2 a pound and suddenly increase to $4, shoppers might buy corn instead, which could then increase its price from $1. 50 to $2.

Detailed Explanation

When potatoes cost more, people look for cheaper options. Other options are incorrect because This answer suggests that higher potato prices would make corn less popular; This answer thinks that corn and potatoes don't affect each other.

Key Concepts

Substitutes in Economics
Consumer Behavior
Market Dynamics
Topic

Substitutes and Complements in Economics

Difficulty

medium level question

Cognitive Level

understand

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