Substitutes lead to higher price for X when Py rises

Steps:

• Positive cross-elasticity of demand means X and Y are substitutes.
• Increase in Py makes Y costlier, so consumers switch to X, raising demand for X.
• Demand curve for X shifts rightward.
• Upward-sloping supply curve for X results in new equilibrium with higher Px.

Why the price of X increases:

• In supply-demand equilibrium, rightward demand shift intersects upward supply at higher price (law of supply and demand).

Why the others are wrong:

• A. True (demand rises), but question asks specifically about price of X, not demand.
• B. Irrelevant; increase in Py is given, but doesn't directly state effect on Y's demand curve.
• C. Incorrect; price falls only for complements (negative cross-elasticity).
• D. True (quantity supplied rises with price), but question focuses on price, not quantity.

Final answer: The price of good X will increase.