CA Foundation Exam > CA Foundation Questions > When the price of a substitute of X commodity...
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When the price of a substitute of X commodity falls, the demand for X
- a)rises
- b)falls
- c)remains unchanged
- d)Any of these
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
When the price of a substitute of X commodity falls, the demand for Xa...
Understanding Substitute Goods
When analyzing the relationship between substitute goods, it is essential to comprehend how changes in price affect consumer behavior.
Definition of Substitute Goods
- Substitute goods are products that can replace each other in consumption.
- When the price of one substitute falls, consumers tend to shift their preferences towards that option.
Impact of Price Drop on Demand for Commodity X
- If the price of a substitute for commodity X decreases, consumers are likely to choose the cheaper option.
- As a result, the demand for commodity X will decrease.
Illustration of Consumer Behavior
- For example, if coffee (substitute X) and tea (substitute Y) are available, and the price of tea drops:
- Consumers may buy more tea because it is now cheaper.
- Consequently, the demand for coffee will fall as consumers switch to the less expensive alternative.
Conclusion
- Therefore, when the price of a substitute for commodity X falls, the demand for X commodity indeed falls, making option 'B' the correct choice.
- This relationship highlights the direct impact of price changes on consumer choices and market demand dynamics.
Understanding these concepts is crucial for grasping the fundamentals of demand and supply in economics, particularly for the CA Foundation curriculum.
When analyzing the relationship between substitute goods, it is essential to comprehend how changes in price affect consumer behavior.
Definition of Substitute Goods
- Substitute goods are products that can replace each other in consumption.
- When the price of one substitute falls, consumers tend to shift their preferences towards that option.
Impact of Price Drop on Demand for Commodity X
- If the price of a substitute for commodity X decreases, consumers are likely to choose the cheaper option.
- As a result, the demand for commodity X will decrease.
Illustration of Consumer Behavior
- For example, if coffee (substitute X) and tea (substitute Y) are available, and the price of tea drops:
- Consumers may buy more tea because it is now cheaper.
- Consequently, the demand for coffee will fall as consumers switch to the less expensive alternative.
Conclusion
- Therefore, when the price of a substitute for commodity X falls, the demand for X commodity indeed falls, making option 'B' the correct choice.
- This relationship highlights the direct impact of price changes on consumer choices and market demand dynamics.
Understanding these concepts is crucial for grasping the fundamentals of demand and supply in economics, particularly for the CA Foundation curriculum.
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When the price of a substitute of X commodity falls, the demand for Xa)risesb)fallsc)remains unchangedd)Any of theseCorrect answer is option 'B'. Can you explain this answer?
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When the price of a substitute of X commodity falls, the demand for Xa)risesb)fallsc)remains unchangedd)Any of theseCorrect answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When the price of a substitute of X commodity falls, the demand for Xa)risesb)fallsc)remains unchangedd)Any of theseCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the price of a substitute of X commodity falls, the demand for Xa)risesb)fallsc)remains unchangedd)Any of theseCorrect answer is option 'B'. Can you explain this answer?.
When the price of a substitute of X commodity falls, the demand for Xa)risesb)fallsc)remains unchangedd)Any of theseCorrect answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When the price of a substitute of X commodity falls, the demand for Xa)risesb)fallsc)remains unchangedd)Any of theseCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the price of a substitute of X commodity falls, the demand for Xa)risesb)fallsc)remains unchangedd)Any of theseCorrect answer is option 'B'. Can you explain this answer?.
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