Answer to Question #301310 in Microeconomics for Safir ul rehman

Question

X and Y are substitute to one another what happen when price of a substitute increases, show its effects on the demand of the other goods.

Answer 1

A substitute is a product or service that may be used in lieu of something else. The demand for the other product is reduced when the price of a substitute is reduced. For example, as the price of tablet computers has dropped in recent years, demand has soared (because of the law of demand). There has been a decline in demand for laptops as a result of individuals acquiring tablets, which can be seen visually as a leftward shift in the demand curve for laptops. The impact of a greater price for a replacement item is the opposite.

Increases or declines in the cost of other, related commodities may affect demand for item X. Substitutes and complements are the two most common categories for these connected commodities. Any good Y that meets most of the same demands as good X is a replacement for good X. If excellent X is butter, for example, a good Y alternative may be margarine. When two products X and Y are substitutes, the demand for good X increases as the price of the substitute item Y rises, and the demand curve for good X moves to the right. In contrast, when the price of the substitute good Y declines, so does the demand for good X, and the demand curve for good X moves to the left.

Therefore, the cost of a substitute item will rise as its price rises. Other goods are in high demand.