[Solved] When price of a substitute of commodity falls, the demand for -

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Q.	When price of a substitute of commodity falls, the demand for -
A.	falls
B.	remains unchanged
C.	increases at increasing rate
D.	rises
Answer» A. falls
Explanation: Cross Price Effect refers to effect on the demand for a given commodity due to a change in the price of a substitute commodity. A change (increase or decrease) in the price ofsubstitutes directly affects the demand for a given commodity. When price of substitute goods (say, coffee) rises, demand for the given commodity (say, tea) also rises at its same price. It leads to a rightward shift in the demand curve of the given commodity. With decrease in price of substitute goods (coffee), demand for the given commodity (tea) also decreases. It shifts the demand curve of the given commodity towards left.

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