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UI Post-UTME Economics 2023 (Model questions) Question 1

Question 1

Theory of Demand

Goods A and B are close substitutes when ________

  1. A.a decrease in demand for good A increases price of good B
  2. B.an increase in price for good A decreases demand for good B
  3. C.an increase in price of good A decreases demand for good B
  4. D.a change in the price of good A does not affect demand for good B
Show the answer and explanation

Answer: A (a decrease in demand for good A increases price of good B)

Explanation

Substitutes replace each other: when buyers turn away from A they buy more of B, so demand for B rises and its price goes up.