Question

Assume two goods are substitutes. Ceteris paribus, a decrease in the price of one good will cause the equilibrium price of the other good to ____

Answer 1

Answer:

Fall or decrease

Explanation:

Other things being constant, if two goods are close substitutes, decrease in the price of one good will lead to fall in the demand of its substitute, The price of the good that has fallen is now available at cheaper price. So consumers will demand more of cheaper good, thereby increasing its demand and decreasing the demand of substitute good. As such, both equilibrium price and quantity of other good falls or decrease.