[amp_mcq option1=”B will increase” option2=”C will increase” option3=”Both B and C will increase” option4=”B and C will decrease” correct=”option2″]<\/p>\n
The correct answer is: Both B and C will increase.<\/p>\n
When the price of good A increases relative to the price of substitutes B and C, consumers will tend to substitute B and C for A. This is because B and C are now relatively cheaper than A, so consumers will be more likely to purchase them. As a result, the demand for A will decrease, and the demand for B and C will increase.<\/p>\n
Here is a diagram that illustrates the effect of a price increase on demand:<\/p>\n
[Diagram of a demand curve shifting to the left]<\/p>\n
The original demand curve is D0, and the new demand curve is D1. The price of good A has increased, so the demand curve has shifted to the left. This means that at any given price, consumers are now willing to purchase less of good A.<\/p>\n
Here is a diagram that illustrates the effect of a price increase on substitutes:<\/p>\n
[Diagram of two demand curves, one for good A and one for good B, with good A’s demand curve shifting to the left]<\/p>\n
The original demand curve for good A is D0A, and the original demand curve for good B is D0B. The price of good A has increased, so the demand curve for good A has shifted to the left, to D1A. This means that at any given price, consumers are now willing to purchase less of good A. However, the price of good B has not changed, so the demand curve for good B has not shifted. This means that at any given price, consumers are still willing to purchase the same amount of good B.<\/p>\n
As a result of the price increase for good A, the demand for good A has decreased, and the demand for good B has increased.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”B will increase” option2=”C will increase” option3=”Both B and C will increase” option4=”B and C will decrease” correct=”option2″]<\/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-57974","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n