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WAEC Economics 1992 Question 14

Question 14

Price Determination

If the price of margarine rises substantially, the equilibrium price and quantity of butter demanded will

  1. A.decrease
  2. B.increase
  3. C.remain constant
  4. D.fluctuate
  5. E.be inelastic.
Show the answer and explanation

Answer: B (increase)

Explanation

Butter and margarine are substitutes; dearer margarine raises demand for butter, so its price and quantity both rise.