If in the textile markets we know that two brands, X and Z, are substitutes. Suppose that the supply of X increases and, at the

Question

3 years ago

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If in the textile markets we know that two brands, X and Z, are substitutes. Suppose that the supply of X increases and, at the

same time, the supply of the Z decreases. Other things being equal, what would be the expectations for the change in the equilibrium quantities in the two markets

Business

1 answer:

katrin2010 [14] · Answer 1 · 2022-05-31T08:46:52+03:00

Answer:

Equilibrium quantity of X increases and that of z decreases.

Explanation:

If two goods are substitutes then 1 can be used in the place of the other. As supply of Z falls, we would have market demand to be greater than supply. This brings about a price rise. The price rise will make consumers of Z to want it less and opt for a cheaper good X. Increase in the demand for X causes its supply to rise in the market.

So we would have increase in equilibrium quantity of X and that of Z would fall.