Question

Carrot cake is a substitute for spice cake. If the price of spice cake falls, explain what is likely to happen to the demand for carrot cake. Why is this the case?

Answer 1

In case of substitute good if demand of one good increases demand of other good also decreases and if demand of one good falls then demand for other good also increases.

if the price of spice cake falls then its demand will rise since the carrot cake is substitute good to spice cake the demand for carrot cake will decrease .

this is the case because spice cake is substitute of carrot cake and when price of spice cake will fall under normal condition people will switch its consumption from carrot cake to spice cake and demand for carrot cake will decrease and spice cake will increase