Question

Goods X and Y are perfect substitutes. When the market price of good X is​ $5/unit, firm F produces 500 units of X. When the price of Y​ rises, 100 consumers of Y shift to the consumption of good X. This causes industry analysts to think that firm F will increase quantity supplied of X to match this increased demand. This conclusion is flawed because___________.

Answer 1

Answer:

According to this situation, we assume that firm F is the only producer of product X.

Explanation:

A perfect replacement is a condition in which two items are considered equal. Great replacements are goods and you can't build a brand whereby consumers like the commodity.

Except for a market price, optimal substitution suppliers must have no impact on the quality.

• Therefore, in this situation product Y's price rises, so people shift for product X.

• In results, firm F had to increase his supply which shows that firm F is the only producer of product X in the industry.