Question

Explain the effect of the following on the demand of a commodity,

a) Change in price of substitute goods.

b) Change in income of the consumer.

c) Change in distribution of income.​

Answer 1

Explanation:

The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good compared to that of other substitute goods. For example, when the price of a good rises, it becomes more expensive relative to other goods in the market.

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