Question : When price of a substitute of commodity 'x' falls, the demand for 'x':
Option 1: falls
Option 2: remain unchanged
Option 3: increase at an increasing rate
Option 4: rises
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Correct Answer: falls
Solution : The correct option is falls .
When the cost of a commodity 'x' substitute drops, so does the demand for 'x' generally. This is due to consumers' propensity to switch to the less expensive alternative, which lowers the demand for the commodity.
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