The correct option is
A. substitute goods.
Explanation of the Correct Answer
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Understanding Substitute Goods: Substitute goods are products that can replace each other in consumption. When the price of one good rises, consumers tend to buy more of the other good instead. In this case, butter and margarine serve as substitutes because they can fulfill similar needs (spreading on bread, cooking, etc.).
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Price Increase and Demand Relationship: The question states that there is an increase in the price of butter. According to the law of demand, when the price of a good increases, the quantity demanded for that good typically decreases. However, consumers will look for alternatives that can satisfy the same need. Therefore, as the price of butter rises, consumers will buy more margarine, leading to an increase in the demand for margarine.
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Demand Curve Shift: When we say that the demand for margarine increases due to the price increase of butter, we are indicating a rightward shift in the demand curve for margarine. This shift occurs because consumers are substituting margarine for the now more expensive butter.
Why the Other Options Are Incorrect
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B. Complementary Goods: Complementary goods are products that are consumed together. An increase in the price of one good typically leads to a decrease in the demand for its complement. For example, if the price of printers rises, the demand for ink cartridges would likely decrease. Since butter and margarine can replace each other rather than complement each other, this option is incorrect.
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C. Elastic Goods: Elastic goods refer to products whose demand changes significantly with a change in price. While butter and margarine may have elastic demand, the question specifically addresses the relationship between the two goods rather than their price elasticity. Therefore, this option does not directly answer the question.
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D. Inelastic Goods: Inelastic goods are those for which demand does not change significantly with price changes. Again, this option does not apply to the relationship between butter and margarine. The question focuses on the demand response to price changes, not the elasticity of demand for either good.
Summary of Key Concepts
- Substitute Goods: Goods that can replace each other; an increase in the price of one leads to an increase in demand for the other.
- Demand Curve Shift: A rise in the price of butter causes a rightward shift in the demand curve for margarine.
- Complementary Goods: Goods consumed together; an increase in the price of one leads to a decrease in demand for the other.
- Elasticity: Refers to how demand changes with price; not directly relevant to the relationship in this question.
Revision Summary
- Substitute goods increase in demand when the price of a related good rises.
- The demand for margarine increases as butter's price rises, indicating they are substitutes.
- Complementary goods behave oppositely; their demand decreases when the price of one rises.
- Elasticity measures demand sensitivity to price changes, not the relationship between goods.