Question

Vodka and whiskey are considered by consumers to be substitutes. The likely economic impact of a decrease in the price of whiskey is a:

Answer 1

The likely economic impact of a decrease in the price of whiskey is decrease in the consumption of vodka. On the demand curve, there will be leftward shift of the demand curve for vodka. This is as a result of substitution effects. Substitute goods are goods which as a result of changed conditions may replace each other in use or consumption.