📚 Learning Guide
Understanding Demand and Supply
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If the price of a substitute good increases, what is likely to happen to the demand for the original good?

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Learning Path

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Choose the Best Answer

A

Demand for the original good will increase

B

Demand for the original good will decrease

C

Demand for the original good will remain unchanged

D

Supply of the original good will increase

Understanding the Answer

Let's break down why this is correct

Answer

When the price of a substitute good increases, the demand for the original good is likely to increase as well. A substitute good is something that people can use instead of another product; for example, if the price of butter goes up, people might buy more margarine instead. This happens because consumers want to save money, so they look for alternatives that are cheaper. As more people buy the original good, its demand rises, which can also lead to an increase in its price. In this way, the relationship between substitute goods helps to explain how market demand works.

Detailed Explanation

When the price of a substitute good goes up, people look for cheaper options. Other options are incorrect because Some might think that higher prices mean less demand; It's a common mistake to think demand stays the same.

Key Concepts

Demand Shifters
Substitute Goods
Market Equilibrium
Topic

Understanding Demand and Supply

Difficulty

medium level question

Cognitive Level

understand

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