Question

For a normal good, if the price of a substitute good decreases then:

(A) the demand curve shifts rightward while the supply curve stays the same.
(B) the demand curve shifts leftward while the supply curve stays the same.
(C) the demand curve shifts leftward while the supply curve stays the leftward.
(D) the demand curve shifts rightward while the supply curve shifts leftward.

Answer 1

Answer:

(B) the demand curve shifts leftward while the supply curve stays the same.

Explanation:

"Substitutes are goods where you can consume one in place of the other. The prices of complementary or substitute goods also shift the demand curve. When the price of a good that complements a good decreases, then the quantity demanded of one increases and the demand for the other increases. When the price of a substitute good decreases, the quantity demanded for that good increases, but the demand for the good that it is being substituted for decreases. "

Reference: Khan Academy. “Price of Related Products and Demand.” Khan Academy, Khan Academy, 2019