An increase in the price of a close substitute for good A will:
A)increase demand, increase price and increase the quantity exchanged.
B)increase demand, increase price and decrease the quantity exchanged.
C)increase supply, increase price and increase the quantity exchanged.
D)decrease demand, decrease price and decrease the quantity exchanged.

Question

An increase in the price of a close substitute for good A will:
A)​increase demand, increase price and increase the quantity exchanged.
B)​increase demand, increase price and decrease the quantity exchanged.
C)​increase supply, increase price and increase the quantity exchanged.
D)​decrease demand, decrease price and decrease the quantity exchanged.

Quizplus · Accepted Answer

When the price of a close substitute for good A increases, consumers are likely to switch their demand to good A, leading to an increase in demand for good A. This increased demand can lead to a higher price and a higher quantity exchanged, as suppliers respond to the higher demand.

An Increase in the Price of a Close Substitute for Good