Significant Substitution Dynamic Changes in Demand as Py Prices Fall | Elon University - Edubirdie

University:
Elon University
Course:
ECO 1000 | Economics
Academic year:

2024
Views:

422

Pages:

1
Author:

Masadepan C.

Significant Substitution: Dynamic Changes in Demand as Py Prices Fall Price change of X and or Y with the case of X and Y relationship there is substitution of substitute goods = Py Px 10 10 Py 8 5 downX down M 80 80 x 3,6 3,5 y 5,5 9 MUx 18,5 29 MUy 14,8 14,5 Umax 108,6 157,5 M/Px = 8 M/Py = 10 M/P'y = 16 y 16 10 x 3,5 3, 68 Explanation: Analyze from the graph that when Py goes down, good X will also go down. This shows the relationship of goods X and Y is substitution. Where substitute goods are substitute goods, when the price of good Y rises, buyers tend to choose good X because the price is cheaper, and when the price of good Y falls, buyers tend to choose good Y and good X decreases.

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