The graphs below refer to the market for good X.Firms can produce either good X or good Y,which consumers consider to be a substitute for good X.A decrease in the price of good Y will to lead to the shifts shown by
A) Graph (a).
B) Graph (b).
C) Graph (c).
D) Graph (d).
E) Both Graph (a)and Graph (d).

Question

The graphs below refer to the market for good X.Firms can produce either good X or good Y,which consumers consider to be a substitute for good X.A decrease in the price of good Y will to lead to the shifts shown by 
A) Graph (a). 
B) Graph (b). 
C) Graph (c). 
D) Graph (d). 
E) Both Graph (a)and Graph (d).

Quizplus · Accepted Answer

A decrease in the price of good Y (a substitute for good X) will lead to an increase in the demand for good Y, causing a shift of the demand curve for good Y to the right. This will lead to a decrease in the quantity of good X demanded (movement along the demand curve for good X) as consumers switch to the cheaper substitute good Y. Therefore, only Graph (b) shows a leftward shift of the demand curve for good X in response to a decrease in the price of good Y.

The Graphs Below Refer to the Market for Good X