Question

Effect of change in price of substitute goods on supply of other goods. (Will the supply increase of the product if the price of its substitute product increases?)​

Answer 1

One good is a perfect substitute for another if it can be used in exactly the same way. In that case, the utility of a combination of the two goods is an increasing function of the sum of the quantity of each good. Theoretically, if the prices of the goods differed, there would be no demand for the more expensive good.

Answer 2

Explanation:

A change (increase or decrease) in the price of substitutes directly affects the demand for a given commodity. (ii) Decrease in Price of Substitute Goods: With decrease in price of substitute goods (coffee), demand for the given commodity (tea) also decreases from OQ to OQ1 at the same price of OP.