Question

The law of demand holds in the market for three​ goods, X,​ Y, and Z. An increase in the price of X causes an increase in the price of Y. A decrease in the price of X causes a decrease in the demand for Z.
Which of the following conclusions is most strongly supported by the information given​ above?
A) Y and Z are complements.
B) Y and Z are inputs in the production of X.
C) Z is a substitute for input X in the production of Y.
D) The slope of the demand curve for X is zero.
E) X and Y are substitutes.

Answer 1

Answer:

C) Z is a substitute for input X in the production of Y. 

Explanation:

Goods are substitutes if they can be used in place of each another. For example, pen and pencil can be considered as substitute.

If the price of a good decreases, the demand for that good increases and the demand for the subsituite falls. X and Z are substitutes

Complements are goods that are consumed together e.g. bread and butter.

Inputs are goods used in the production of output. If the price of input increases, the price of the output increases. Therefore, X is an input in the production of Y.

Since X and Z are substitutes, and X is an input for Y.

I hope my answer helps you