Consider the market for soybeans illustrated in the figure below.
Consider the market for soybeans illustrated in the figure below. Assume the market is initially in equilibrium at point A. Suppose the price of peas increases (and that peas are a substitute for soybeans). How does this affect the market?
The soybean demand curve will shift to the right.
The soybean demand curve will shift to the left.
The soybean supply curve will shift to the right.
The soybean supply curve will shift to the left
Homework Answers
Answer - The soyabean demand curve will shift to the right.
Reason - in case of substitute the cross price elasticity of demand is positive. Which means if price of a product increases the demand for its substitute will increase and if price of a product will decrease the demand for its substitute will decrease.
In this case peas are a substitute of soyabean , so an increase in price of peas will increase the demand for soyabean, which will shift the demand curve of soyabean to the right.
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