Goods x and y are perfect substitutes. When the market price of good x is $5/unit, firm F produces 500 units of x. When the price of y rises, 100 consumers of y shift to the consumption of good x. This causes industry analysts to believe that firm f has increased quantity supplied of x by 100 units to meet the higher demand for it. To arrive at this conclusion, the industry analysts are assuming that a. Good x is the only substitute of y available to them. b. Each person will now buy more of x than they did prior to the increase in the price of y. c. Good y is an inferior good. d. The law of supply does not hold for good y. e. The new buyers of good x will, on average, consume one unit each. It’s apparently not b.
Goods x and y are perfect substitutes. When the market
To arrive at this conclusion, the industry analysts are assuming that
a. Good x is the only substitute of y available to them.
b. Each person will now buy more of x than they did prior to the increase in the price of y.
c. Good y is an inferior good.
d. The law of supply does not hold for good y.
e. The new buyers of good x will, on average, consume one unit each.
It’s apparently not b.
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