When the price of frozen french fries increases, the equilibrium price of frozen sweet potato fries, a substitute good, will ________ because of a shift in ________.

Question

BlackTom AI · Accepted Answer

When the price of one substitute rises, consumers switch toward the other substitute, raising its demand, so the equilibrium price of the other good increases.

1) Relevant concepts:
- Substitute goods: two goods are substitutes if a rise in the price of one increases demand for the other.
- Demand curve shift vs. movement along a curve: a change in the price of good A causes consumers to change their purchases of good B, which shifts B’s demand curve (not its supply).
- Market equilibrium: price adjusts where supply and demand intersect; a rightward shift of demand with supply unchanged raises equilibrium price and quantity.

2) Step-by-step reasoning:
- Initial situation: frozen french fries and frozen sweet potato fries are substitutes.
- Price change: price of frozen french fries rises.
- Consumer response: some buyers switch from french fries to sweet potato fries.
- Effect on sweet potato fries’ demand: the demand curve for sweet potato fries shifts right (increase in demand) at every price.
- Shortage at old price: at the original price, quantity demanded of sweet potato fries now exceeds quantity supplied, creating upward pressure on price.
- New equilibrium: price rises until quantity supplied equals the new higher quantity demanded. Quantity sold also increases.

3) Intermediate logical steps shown:
- P_french ↑ → consumers substitute → D_sweetpotato shifts right.
- At original P_sweet: Qd_new > Qs → shortage → P_sweet rises.
- Market moves to new equilibrium with higher P_sweet and higher Q.

4) Why the correct answer is correct:
Because the initial change (higher price of french fries) affects consumer preferences between substitutes, it causes a shift in demand for sweet potato fries, and that demand increase raises the equilibrium price.

5) Why other options are incorrect:
- (a) increase; supply: supply doesn’t change because the cost/production conditions of sweet potato fries were not altered by the price of french fries.
- (c) decrease; supply: price rise of the substitute would not cause a supply decrease nor a price decrease.
- (d) remain constant; demand: demand does change (it increases), so price does not remain constant.

6) Conclusion:
The equilibrium price of frozen sweet potato fries will increase because of a shift in demand, matching answer b.

When the price of frozen french fries increases, the equilibrium price of frozen sweet potato fries, a substitute good, will because of a shift in .Single choice

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When the price of frozen french fries increases, the equilibrium price of frozen sweet potato fries, a substitute good, will because of a shift in .Single choice