Australian Year 10 Economics Practice Test

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If the price of a substitute in consumption rises, what happens to the demand for the original good?

Demand decreases.

Demand remains the same.

Demand increases.

Substitutes and cross‑price effects: when the price of a substitute rises, more people switch to the original good, so demand for the original increases. This means the demand curve for the original shifts to the right, not just a change along its own curve.

It's not about quantity supplied, which is a seller-side response, nor is it a unchanged demand or a decrease in demand—the rise in the substitute’s price creates a positive cross‑price effect, boosting demand for the original.

Quantity supplied decreases.

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