If bagels and doughnuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced? a. The demand curve for bagels will shift to the leftb. There will be a leftward movement along the bagel demand curvec. The demand curve for doughnuts will shift to the rightd. The demand curve for doughnuts will shift to the left

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Camilla Salazar

27 January, 18:39

If bagels and doughnuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced? a. The demand curve for bagels will shift to the leftb. There will be a leftward movement along the bagel demand curvec. The demand curve for doughnuts will shift to the rightd. The demand curve for doughnuts will shift to the left

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Marilyn Kline · Answer 1

D.

Explanation:

If good A and good B are substitutes, then the demand curves for both goods are correlated. If the price of good A increases, then consumers will prefer good B and the demand curve for good B will increase and shift to the right. This happens because consumer can replace easily good A for good B and vice versa. And because of this, consumers are sensible to price changes of the two goods.

In this case, the price of bagels decreased and because consumers can replace easily bagel for doughnuts, they will prefer the cheaper good: bagels. If a large portion of consumers stop buying doughnuts because now they replace them for bagels, the demand curve for doughnuts will decrease and shift to the left.