Answer :
Let's consider the relationship between products C and D:
### Substitutes Explained:
- Substitute Goods: When two goods are substitutes, an increase in the price of one good generally leads to an increase in the demand for the other good.
### Scenario Analysis:
- Increase in the Price of Product C:
- When the price of product C increases, consumers will find product C relatively more expensive.
- As a result, some consumers will switch from product C to its substitute, product D, because product D becomes relatively cheaper compared to product C.
### Impact on Demand Curves:
- Product C:
- Since product C has become more expensive, the quantity demanded for product C will decrease.
- This can be represented by a leftward shift in the demand curve for product C.
- Product D:
- With consumers switching from product C to product D, the demand for product D will increase.
- This increased demand for product D is represented by a rightward shift in the demand curve for product D.
### Final Conclusion:
- Correct Answer: An increase in the price of product C will shift the demand curve of product D to the right.
Therefore, the correct choice that best describes the effect of an increase in the price of product C, given that products C and D are close substitutes, is:
O shift the demand curve of D to the right.
### Substitutes Explained:
- Substitute Goods: When two goods are substitutes, an increase in the price of one good generally leads to an increase in the demand for the other good.
### Scenario Analysis:
- Increase in the Price of Product C:
- When the price of product C increases, consumers will find product C relatively more expensive.
- As a result, some consumers will switch from product C to its substitute, product D, because product D becomes relatively cheaper compared to product C.
### Impact on Demand Curves:
- Product C:
- Since product C has become more expensive, the quantity demanded for product C will decrease.
- This can be represented by a leftward shift in the demand curve for product C.
- Product D:
- With consumers switching from product C to product D, the demand for product D will increase.
- This increased demand for product D is represented by a rightward shift in the demand curve for product D.
### Final Conclusion:
- Correct Answer: An increase in the price of product C will shift the demand curve of product D to the right.
Therefore, the correct choice that best describes the effect of an increase in the price of product C, given that products C and D are close substitutes, is:
O shift the demand curve of D to the right.
