How does a rise in the price of a substitute for olive oil affect the demand for olive oil?
Yes, the statement is true. A rise in the price of a substitute for olive oil will result in an increased demand for olive oil.
Understanding the Relationship Between Substitutes and Demand
In economics, goods that can be used in place of each other are known as substitutes. It is essential to know that substitutes have a direct relationship when it comes to demand. This means that if the price of one good increases, the demand for its substitute will also increase. The same principle applies to olive oil and its substitutes.
When the price of a substitute for olive oil, such as canola oil or sunflower oil, rises, consumers will start looking for alternatives that can satisfy their needs but are available at a lower price. In this scenario, olive oil becomes a more attractive option due to its relatively lower price compared to the substitute that had a price increase. As a result, the demand for olive oil will increase as consumers shift their preferences towards it.
This phenomenon occurs because people tend to choose products that offer the best value for their money. When the price of a substitute for olive oil goes up, consumers perceive olive oil as a more cost-effective option, leading to a higher demand for this particular product.
In conclusion, a rise in the price of a substitute for olive oil will indeed increase the demand for olive oil due to the direct relationship between substitutes and demand in economics.