[amp_mcq option1=”rises” option2=”falls” option3=”remains unchanged” option4=”any of the above” correct=”option1″]<\/p>\n
The correct answer is A. rises.<\/p>\n
When the price of a substitute of commodity X falls, the demand for X will rise. This is because consumers will now be able to get the same satisfaction from consuming less of X and more of the substitute. This is known as the substitution effect.<\/p>\n
In addition, the fall in the price of the substitute will make X relatively more expensive. This is known as the income effect. The income effect will also lead to an increase in the demand for X.<\/p>\n
Therefore, the demand for X will rise when the price of a substitute of commodity X falls.<\/p>\n
Option B is incorrect because the demand for X will rise, not fall.<\/p>\n
Option C is incorrect because the demand for X will change, not remain unchanged.<\/p>\n
Option D is incorrect because only option A is correct.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”rises” option2=”falls” option3=”remains unchanged” option4=”any of the above” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-51212","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n