WAEC 2018 Economics · Question 39

if the price of commodity X rises and consumers shift to commodity Y, then commodity X and Y are?

Options

  1. A.substitutes
  2. B.complements
  3. C.inferior goods
  4. D.bought goods

Answer: A. substitutes

Explanation written with AI and checked against the answer key

Step 1: Analyze the question The price of commodity X goes up, and consumers respond by switching to commodity Y. We need to name the relationship between X and Y.

Step 2: The concept The relationship between two goods is shown by cross elasticity of demand, which is how the demand for one good responds to a change in the price of another.

  • Substitutes: goods that can replace each other, such as Peak milk and Cowbell milk, or Dangote sugar and another brand of sugar. If the price of one rises, demand for the other rises.
  • Complements: goods used together, such as car and petrol, or bread and butter. If the price of one rises, demand for the other falls.
  • Inferior goods: goods whose demand falls when consumers' income rises, such as garri compared with rice for some households. This concerns income, not the price of another good.
  • "Bought goods" is not an economic classification.

Step 3: Apply it

  • The price of X rises, so X becomes more expensive.
  • Consumers move to Y, so demand for Y increases.
  • When a price rise in one good raises demand for another, the two goods are substitutes.

Example: if the price of rice rises and people buy more yam instead, rice and yam are substitutes.

Step 4: Answer The correct option is A. substitutes.

Exam tip: Use the "same direction" rule. If the price of X goes up and the demand for Y also goes up, they are substitutes, because the two move in the same direction. If the demand for Y goes down, they are complements, because they are used together.

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