An increase in the price of a substitute good may or may not cause total spending on a particular good to climb, depending upon the price elasticities of supply and demand of the good in question.

Question

Quizplus · Accepted Answer

If the good in question has a relatively elastic demand and supply, then an increase in the price of a substitute good may cause consumers to switch to the original good, resulting in an increase in total spending. However, if the good has a relatively inelastic demand and supply, then the increase in the price of a substitute good may cause consumers to continue purchasing the original good, resulting in no change or even a decrease in total spending. Therefore, it depends upon the price elasticities of supply and demand of the good in question.

An Increase in the Price of a Substitute Good May