Question

What is the relation between Good-X and Good-Y, if with a rise in the price of Good-X, demand for Good-Y rises? Give an example.

Answer 1

The goods mentioned are substitute goods. When the price of Good-X rises, consumers switch over from X to Y and therefore, demand for Good-Y rises. Thus, consumers substitute one good with a similar one when there are substitutes available in the market.

Example: If the price of Pepsi rises, consumers are prompted to shift to Coke. Accordingly, demand for Coke rises.