Question

Suppose the market for dairy milk experiences the following event: The price of nut based milk (a substitute for diary milk) increases. The effect on equilibrium will be:

Answer 1

equilibrium price and quantity of diary milk will increase

Step-by-step explanation:

A substitute good is a good that can be used in place of another good.

If the price of nut based milk, a substitute for diary milk increases, nut based milk becomes more expensive for consumers and as a result consumers would increase their demand for diary milk. This would lead to an outward shift of the demand curve and as a result, equilibrium price and quantity of diary milk will increase

Please check the attached image for a graphical representation