Question

If goods a and b are substitutes, and the price of good a doubles while the price of good b stays the same, what will happen to the demand for good a?

1) The demand for good a will increase
2) The demand for good a will decrease
3) The demand for good a will stay the same
4) Cannot be determined

Answer 1

If the price of a substitute good (good b) stays the same while the price of good a doubles, the demand for good a will decrease.

Step-by-step explanation:

If goods a and b are substitutes, and the price of good a doubles while the price of good b stays the same, the demand for good a will decrease. This is because when the price of good a increases, consumers will be more likely to purchase the substitute good b instead, as it is now relatively cheaper. As a result, the demand for good a will decrease.