How is the equilibrium price of a commodity affected by a rise in the prices of its substitutes? Explain the chain of effects.

How is the equilibrium price of a commodity affected by a rise in the

1.	How is the equilibrium price of a commodity affected by a rise in the prices of its substitutes? Explain the chain of effects.
Answer» Solution :A RISE in price of substitues leads to an increase in the demand for the commodity. HENCE, the demand curve will shift rightwards. With this increase in demand and supply being the same, equilibrium price will rise with an increase in COMPETITION among BUYERS. This increase in price leads to an increase in supply and a fall in demand. Hence, as a result, equilibrium price and equilibrium quantity rises.