Asked by Danielle Tabor on Jun 11, 2024
Verified
Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. A decrease in the price of X can be expected to
A) decrease the demand for Z.
B) increase the demand for Z.
C) have no effect on the demand of product Z.
D) decrease the supply of Z.
E) increase the supply of Z.
Substitute
A good or service that can be used in place of another, offering consumers a choice when making purchase decisions.
Input
Resources used in the production process of goods or services, including labor, materials, and capital.
- Evaluate the consequences of external modifications, like alterations in the cost of inputs or current trends, on the movement of related goods within the market.
Verified Answer
LN
Lyndsy NoellJun 14, 2024
Final Answer :
A
Explanation :
A decrease in the price of product X (an input for product Y) would likely lower the production costs for product Y, potentially leading to an increase in the supply of product Y. Since product Y is a substitute for product Z, an increase in the supply (and potentially a decrease in the price) of product Y could make consumers switch from product Z to product Y, thereby decreasing the demand for product Z.
Learning Objectives
- Evaluate the consequences of external modifications, like alterations in the cost of inputs or current trends, on the movement of related goods within the market.