If two goods are substitutes, then an increase in the price of one of them will increase the demand for the other.

Question

Quizplus · Accepted Answer

When the price of one substitute good increases, consumers are likely to switch to the other substitute good as a cheaper alternative, leading to an increase in its demand. This relationship is known as the cross-price elasticity of demand, and it indicates that substitute goods have a positive cross elasticity of demand.

If Two Goods Are Substitutes, Then an Increase in the Price