Answer to Question #204816 in Economics of Enterprise for Busisiwe

Question

An increase in the price of one product leads to an increase in demand for another product. This means that these two are?

Answer 1

Solution:

This means that these two products are substitutes.

Substitute products are two alternative products that could be utilized for the same purpose. A substitute good is normally a good that can be used in place of another and they offer consumers alternatives while creating competition and lowering prices in the marketplace.

Therefore, when the price of one substitute product increases, consumers will stop purchasing the product and proceed to purchase its substitute product with lower prices hence increasing its demand.