If goods X and Y are substitute goods, then an increase in the price of Y, other things being equal,
A) results in a decrease in the amounts of both X and Y consumed.
B) decreases the quantity demanded of Y, but has no effect on the amount of X consumed.
C) results in a decrease in the quantity of Y consumed, but increases the demand for X.
D) has no real effect on the quantity demanded of good Y, but increases the demand for X.

Question

Quizplus · Accepted Answer

If goods X and Y are substitute goods, an increase in the price of Y makes it relatively more expensive and consumers will switch to consuming more of good X as a substitute for Y. Therefore, quantity demanded of Y will decrease, but the demand for X will increase, resulting in an increase in the quantity demanded of X. Choice A is incorrect because the increase in price of Y does not necessarily result in a decrease in the amount of X consumed. Choice B is incorrect because an increase in the price of Y will have an effect on the amount of X consumed. Choice D is incorrect because an increase in price of Y will result in a decrease in the quantity demanded of Y, it is not the same as having no effect on it.

If Goods X and Y Are Substitute Goods, Then an Increase