Question

Chicken and tuna fish are substitutes in consumption. Suppose that new technology decreases the cost of catching tuna. This would result in _________ in the equilibrium quantity and ________ in the equilibrium price for chicken.

A. an increase; an increase
B. a decrease; a decrease
C. an increase; a decrease
D. a decrease; an increase
E. There is not enough information to determine what will happen.

Answer 1

B. a decrease; a decrease

Step-by-step explanation:

Substitutes' goods are products that can be consumed in place of each other. If one product is missing, consumers will be ready and willing to buy its substitute. An increase or fall in the price of a good or services will cause the demand for its substitute to move in the opposite direction.

Equilibrium quantity is when supply matches the demand. If the price of Tuna fish decreases, its demand will increase as more customers will afford it. Tuna and chicken are substitutes, should the price of Tuna decrease, customers will prefer to consume Tuna over chicken. Consequently, the demand for chicken will reduce w leading to a decrease in its price.