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30 November, 16:34

Assume that jelly beans and chocolate bars are substitute goods. If the price of jelly beans increases, what will happen to the demand for chocolate bars?

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  1. 30 November, 19:33
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    Demand for chocolate bars increases.

    Explanation:

    There are two goods: jelly beans and chocolate bars. They are substitute goods. We know that there is a positive relationship between the price of one good and the demand for other good. The substitute goods are generally have a positive cross price elasticity of demand.

    This means that as the price of jelly beans increases then as a result the demand for chocolate bars increases even if the price chocolate remains the same.
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