Question

If bagels and doughnuts are substitute goods, then which scenario is likely to occur if the price of bagels is reduced?

a.The demand curve for doughnuts will shift to the left.
b.There will be a leftward movement along the bagel demand curve.
c.The demand curve for doughnuts will shift to the right.
d.The demand curve for bagels will shift to the left.

Answer 1

Answer: If the price of bagels is reduced "a.The demand curve for doughnuts will shift to the left."

Explanation: Being substitute goods The decrease in the price of bagels causes consumers to prefer to consume bagets before donating, therefore the demand for donuts will shift to the left (decrease).