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Question
Explain how changes in prices of other products influence the supply of a given product.
Solution
The price of other goods influence the supply of goods, it implies that the prices of the substitute goods and complementary goods will affect the supply of goods in the market. There is positive relationship between the supply of good and the price of its substitute and complementary goods.
If the price of the substitute goods decline, the consumer will shift their wish to buy that good. So, there will be decline in the demand of the good and in turn no profit to supply this good. Hence, the supply of the good will decrease. For example: tea and coffee
If the price of the complementary goods decline, the consumer will shift their wish to buy that good. So, there will be raise in the demand of the good and in turn more profit to supply more of that good. Hence, the supply of the good will increase. For example: petrol and car
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