Question

What effect will each of the following have on the demand for product A?
a) The price of substitute product C rises.
b) Income increases and product A is an inferior good.

Answer 1

Answer:

In a market economy, the price of a good or service and the quantity of it sold are determined by the forces of supply and demand. The market will settle at the equilibrium, which is the point at which quantity supplied equals quantity demanded. Once the market reaches equilibrium, it will remain there until there is a shock to either the supply, the demand, or both.