WBCS.LIVE practice question

According to the law of demand, what happens when the price of a substitute good increase?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. The demand for the original good decreases.
  2. The demand for the original good increases.
  3. The supply of the original good increases.
  4. The demand for the original good remains perfectly perfectly elastic.

Correct answer and explanation

Correct answer: The demand for the original good increases.

Explanation: āœ… Correct Answer: B) The demand for the original good increases. šŸ“š Explanation: Substitute goods are products that can be used in place of one another, such as tea and coffee. If the price of a substitute good (like coffee) increases, consumers will naturally shift their preference to the relatively cheaper original good (like tea). Consequently, the overall demand for the original good increases even though its own price has not changed.