if you want to remove an article from website contact us from top.

# if the price of oranges, a substitute for apples, increases. what will happen to the demand for apples?

Category :

### James

Guys, does anyone know the answer?

get if the price of oranges, a substitute for apples, increases. what will happen to the demand for apples? from EN Bilgi.

## ECON 150: Microeconomics

Section 01: Supply and DemandSupply and Demand

Teach a parrot the terms of 'supply and demand' and you’ve got an economist.

-- Thomas Carlyle

A market brings together and facilitates trade between buyers and sellers of a good or services. These markets range from bartering in street markets to trades that are made through the internet with individuals around the world that never have met face to face.

A market consists of those individuals who are willing and able to purchase the particular good and sellers who are willing and able to supply the good. The market brings together those who demand and supply the good to determine the price.

For example, the number of many apples an individual would be willing and able to buy each month depends in part on the price of apples. Assuming only price changes, then at lower prices, a consumer is willing  and able to buy more apples. As the price rises (again holding all else constant), the quantity of apples demanded decreases. The Law of Demand captures this relationship between price and the quantity demanded of a product. It states that there is an inverse (or negative) relationship between the price of a good and the quantity demanded.

Demand Curve

Recall, that we represent economic laws and theory using models; in this case we can use a demand schedule or a demand curve to illustrate the Law of Demand.  The demand schedule shows the combinations of price and quantity demanded of apples in a table format.  The graphical representation of the demand schedule is called the demand curve.

When graphing the demand curve, price goes on the vertical axis and quantity demanded goes on the horizontal axis. A helpful hint when labeling the axes is to remember that since P is a tall letter, it goes on the vertical axis. Another hint when graphing the demand curve is to remember that demand descends.

The demand curve reflects our marginal benefit and thus our willingness to pay for additional amounts of a good.  It makes sense that our marginal benefit, or willingness to pay for a good, would decline as we consume additional units because we get less additional satisfaction from each successive unit consumed. For example, at lunch time you decide to buy pizza by-the-piece.  You'd be willing to pay a lot for that first piece to satisfy your hunger.  But what about the second piece?  Perhaps a little less.  If we keep considering each additional piece, we might ask what the 3rd, 4th or 5th piece is worth to you.  By that point, you'd be willing to pay less, perhaps much less.  The law of demand and our models illustrate this behavior.

A more formal examination of the law of demand shows the most basic reasons for the downward sloping nature of demand. The first is the substitution effect which states that as the price of the good declines, it becomes relatively less expensive compared to the price of other  goods and thus the quantity demanded is greater at a lower price. When the price of the good rises, the opposite occurs; that is, as the price of the good becomes relatively more expensive compared to other goods a lower quantity will be demanded. For example, as the price of apples increases or decreases, apples become relatively more or less expensive compared to other goods, such as oranges. Thus if the price of apples declines, consumers will buy more apples since they are relatively less expensive compared to other goods, such as oranges.

The second factor is the income effect which states that as the price of a good decreases, consumers become relatively richer.  Now, their incomes have not increased, but their buying power has increased due to the lower price.  If they continued to buy the same amount, they would have some money left over - some of that extra money could be spent on the good that has the lower price, that is quantity demanded would increase.  On the other hand, as the price of a good increases, then the buying power of individuals decreases and the quantity demanded decreases. For example, at 20 cents per apple, we are able to purchase 5 apples for \$1 but if the price falls to 10 cents, we would be able to buy 10 apples for \$1. Although our income has not changed, we have become relatively richer.

At this point, we have explained why there is an inverse relationship between price and quantity demanded (i.e. we've explained the law of demand).  The changes in price that we have discussed cause movements along the demand curve, called changes in quantity demanded. But there are factors other than price that cause complete shifts in the demand curve which are called changes in demand (Note that these new factors also determine the actual placement of the demand curve on a graph).

While a change in the price of the good moves us along the demand curve to a different quantity demanded, a change or shift in demand will cause a different quantity demanded at each and every price. A rightward shift in demand would increase the quantity demanded at all prices compared to the original demand curve.  For example, at a price of \$40, the quantity demanded would increase from 40 units to 60 units. A helpful hint to remember that more demand shifts the demand curve to the right.

Source : courses.byui.edu

## What will happen to the demand for apples if the price of oranges, a substitute for apples, increases? a. demand for apples will increase b. there will be a movement along the demand curve for apples c. demand for apples will stay the same d. demand for a

Answer to: What will happen to the demand for apples if the price of oranges, a substitute for apples, increases? a. demand for apples will increase b. there...

Demand

like | dislike

## Question:

What will happen to the demand for apples if the price of oranges, a substitute for apples, increases?

a. demand for apples will increase

b. there will be a movement along the demand curve for apples

c. demand for apples will stay the same

d. demand for apples will decrease

## Demand:

In economics, demand refers to the consumer's desire to consume goods or services. The higher the purchasing power of the latter, the higher the probability that he/she can get what he/she demanded.

## Answer and Explanation:

The correct answer is option a. demand for apples will increase.

In a ceteris paribus assumption, and considering that apples are substitutes for oranges (because some consumers may not think apples are substitutes for oranges), the increase in the price of oranges will result in a decrease in demand shifting the demand curve to the left. On the other hand, the demand for apples will increase because the price is much cheaper than that of the oranges causing the demand curve to shift to the right. Hence, the correct answer is option a.

In a practical sense, you went to the supermarket you found the prices of the oranges to be \$2 for 6 pieces. You also found out that, at the same pieces, apples are \$1.50. Considering that the two are substitute goods, you would purchase the cheaper one. That is why the demand for apple increases.

Help improve Study.com. Report an Error

### Become a member and unlock all Study Answers

Start today. Try it now

Create an account

### Ask a question

Our experts can answer your tough homework and study questions.

Ask a question

### Learn more about this topic:

Demand in Economics: Definition & Concept

from

Chapter 7 / Lesson 11

93K

Learn about the demand curve and how the law of demand works with examples. See the demand definition, diagrams, and explanations.

### Related to this Question

Related Answers Related Lessons Related Courses

A mathematical demand function for new Toyotas...

Whenever a new bailout or plan to solve the...

If income in an area declines, will this cause...

An economy consists of two industries, coal and...

### Explore our homework questions and answers library

Browse by subject

Source : study.com

## How are the two goods (apples and oranges) related when, as a result of rise in the price of apples, demand for oranges increases?

Click here👆to get an answer to your question ✍️ How are the two goods (apples and oranges) related when, as a result of rise in the price of apples, demand for oranges increases?

Question

How are the two goods (apples and oranges) related when, as a result of rise in the price of apples, demand for oranges increases?

A

B

C

D

## Inferior Goods

Medium Open in App Solution Verified by Toppr

Correct option is A)

A substitute good is a good that can be used in place of another. It is a good with a positive cross elasticity of demand.

This means a good's demand is increased when the price of another good is increased; both in the same direction.

For example, if apples and oranges are substitutes for a consumer, then if the price of apples increases, the consumer will buy less of apples and more of oranges. Thus, when price of apples increases, the demand for oranges will rise.

Was this answer helpful?

7 0

Source : www.toppr.com

Do you want to see answer or more ?
James 2 month ago

Guys, does anyone know the answer?