Demand increases when substitute prices rise

Steps:

• Identify changes in equilibrium: assume table shows higher price and quantity in period 2 versus period 1, indicating rightward demand shift.
• Recall substitute effect: higher price of a substitute boosts demand for this good as consumers switch.
• Rule out supply shifts: increased P and Q point to demand expansion, not supply contraction.
• Confirm with market forces: rightward demand raises both equilibrium price and quantity.

Why B is correct:

• Law of demand for substitutes: a price increase for one good raises demand for its substitute, shifting the demand curve right and increasing equilibrium P and Q.

Why the others are wrong:

• A: Raises complement price, shifting demand left (lower P and Q).
• C: Minimum price above equilibrium creates surplus (higher P, lower Q).
• D: Supplier tax shifts supply left (higher P, lower Q).

Final answer: B