The demand of a commodity and the price of its substitute goods are directly related to each other. As it is given in question that X and Y are substitute goods so when the price of Y will fall, the demand of X (substitute of Y) will decrease. As a result, demand curve of X will shift towards the left.
The figure shows a situation of decrease in demand.
In the given diagram the original demand curve of commodity X is shown by DD curve, with the fall in the price of substitute good Y the demand of X falls at the same price and so the demand curve shifts from DD to D0D0 and the demand for the given good falls from Q to Q0.
Rate this question :