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?

Question

Ryder Shaw

Business

20 March, 20:53

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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Answers (1)

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India Todd · Answer 1

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.