When the price of a substitute of X commodity falls, the demand for X ...
Yes....the price falls.....
when price of a substitute falls that means it's demand rises...
being it a substitute the other commodity s demand falls...
because compared to the first product it's price is greater so it will have low demand as people will go for the first product.....
Hope it was helpful
When the price of a substitute of X commodity falls, the demand for X ...
Explanation:
When the price of a substitute of commodity X falls, the demand for X falls as well. This is because a substitute is a good that can be used in place of another good. When the price of the substitute falls, consumers have an incentive to switch from commodity X to the substitute, as it becomes relatively cheaper.
Reasons why demand for X falls:
1. Substitution Effect: The decrease in the price of the substitute leads to a decrease in the price of using the substitute compared to commodity X. This makes the substitute relatively more attractive to consumers, leading them to switch from X to the substitute. As a result, the demand for X diminishes.
2. Price-Quantity Relationship: According to the law of demand, there is an inverse relationship between the price of a good and the quantity demanded, assuming other factors remain constant. When the price of the substitute falls, consumers perceive it as a better alternative to commodity X, resulting in a decrease in the quantity demanded of X.
3. Substitute Goods: Substitute goods are goods that can be used in place of each other. When the price of a substitute falls, it becomes more affordable and consumers are more likely to choose it over commodity X. This shift in consumer preference reduces the demand for X.
4. Income Effect: When the price of a substitute falls, consumers may experience an increase in their purchasing power. This allows them to allocate more of their income towards the substitute, reducing their demand for commodity X.
Conclusion:
In summary, when the price of a substitute of commodity X falls, the demand for X falls as well. This is due to the substitution effect, the price-quantity relationship, the availability of substitute goods, and the income effect. All these factors contribute to consumers switching from X to the substitute, resulting in a decrease in the demand for X.