Use the following to answer questions :
Figure 3-2
-Let P* and Q* in Figure 3-2 represent market clearing price and quantity, respectively, of good Q.Given the supply and demand curves drawn in Figure 3-2, a reduction in the price of a substitute good for Q will cause:
A)P* and Q* to climb.
B)P* to climb while Q* declines.
C)P* to climb while Q* holds fixed.
D)P* to fall while Q* climbs.
E)P* and Q* to fall.

Question

Use the following to answer questions :
Figure 3-2 
-Let P* and Q* in Figure 3-2 represent market clearing price and quantity, respectively, of good Q.Given the supply and demand curves drawn in Figure 3-2, a reduction in the price of a substitute good for Q will cause:
A)P* and Q* to climb. 
B)P* to climb while Q* declines. 
C)P* to climb while Q* holds fixed. 
D)P* to fall while Q* climbs. 
E)P* and Q* to fall.

Quizplus · Accepted Answer

A reduction in the price of a substitute good will decrease the demand for good Q, leading to a decrease in both the market clearing price (P*) and quantity (Q*).

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