Given the following table: If there is a successful advertising campaign that convinces consumers to buy more of commodity Y, what would the effect of this be on consumption of commodities X and Z?

      

tab1622019936.png

If there is a successful advertising campaign that convinces consumers to buy more of
commodity Y, what would the effect of this be on consumption of commodities X and Z?

  

Answers


Wilfred
Effect of a successful advertising campaign that convinces consumers to buy more of Y on:
(i)Consumption of Commodity X:
Since X and Y are substitutes, a positive (effective) advertising campaign that leads to more
consumption commodity Y reduces the consumption of X (particularly because X and Y are alternatives in consumption) which is represented by a downward shift of the demand curve of commodity X as shown below:
ans116220191023.png
The increase in demand for commodity Y reduces the demand for X denoted by the downward shift of
the demand curve from DD to D1D1 with both price and quantity of X falling from Pe to P1 and Qe to
Q1 respectively.

(ii) Consumption of commodity Z:
Y and Z are complements and any increase in consumption of Y (in this case arising from the effective
advertising campaign) will no doubt increase the consumption of Z (since Y and Z are jointly consumed or
used e.g. car and petrol), represented by an upward shift of the demand curve as shown below
ans126220191025.png
The increase in demand for commodity Z denoted by the upward shift of the demand curve from DD to
D1D1 eventually increases both the price and quantity of Z from Pe to P1 and Qe to Q1 respectively.

Wilfykil answered the question on February 6, 2019 at 06:26


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