Good X and Y are considered to be substitutes by a consumer. He is currently consuming good X. If the price of Good Y decreases, then arrange the following in correct sequence
(A) Demand for Good X decreases.
(B) Consumer finds Good Y to be relatively cheaper than Good X.
(C) Demand curve for Good X shifts to the left.
(D) Consumer shifts from Good X to Good Y.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (D), (A), (C)
(B) When the price of Good Y decreases, the consumer finds Good Y relatively cheaper than Good X — this happens first.
(D) As a result, the consumer shifts consumption from Good X to Good Y since they are substitutes.
(A) Consequently, the demand for Good X decreases, as consumers now prefer Good Y.
(C) This leads to a leftward shift in the demand curve for Good X in the market.