Chapter3: Supply And Demand: Theory
Section3.2: Supply
Problem 3ST
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Question
When the price of cable TV decreases what will happen to the demand for satellite TV? Draw a diagram to illustrate your answer.
Expert Solution
Step 1 Substitute Goods
Substitute goods are the goods that can be used in place of one another and provide the same level of satisfaction to the consumer.
When the price of a good X increases, the demand of its substitute, i.e, Y increases and vice-versa. It is because with an increase in the price of X, good-Y becomes relatively cheaper, and since both X and Y provides the same level of satisfaction, consumers would tend to shift towards Y.
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