Question

When the price of a substitute of a commodity X falls, then the demand for X.

• A. Rises
• B. Falls
• C. Remains unchanges
• D. First rises and then falls

Answer 1

The correct option is B Falls

Substitute goods are two alternative goods which could be used for same purpose . It is a product or service that consumer sees as the same or similar to another product .

For example , tea and coffee are substitute goods . an increase in price of tea will in demand of coffee . Reason being people take tea and coffee as substitute goods . If the price of tea increases people will prefer coffee as it is cheaper and can be taken as a substitute of tea .Hence if the price of tea falls the demand of tea also falls.