Bananas and apples are substitutes. When the price of bananas falls, and a technological advance in apple production occurs at the same time

Question

Quizplus · Accepted Answer

When the price of bananas falls, consumers may switch from apples to bananas, reducing the demand for apples and leading to a potential fall in the price of apples. A technological advance in apple production increases the supply of apples, which can also lead to a decrease in the price due to higher availability. The equilibrium quantity of apples might rise due to increased supply from the technological advance, but the effect on quantity from the demand side is uncertain since it depends on the magnitude of the shift in demand relative to the shift in supply.

Bananas and Apples Are Substitutes