5 If a change in one factor such as A is the catalyst for a

5. \"If a change in one factor (such as A) is the catalyst for a change in two additional factors (such as Band C) and the two additional factors change in opposite directions, then empirical evidence is needed to determine the net effect of the change in the original factor.\" Do you agree or disagree with this statement? Explain your answer.

Solution

yes emperical evidence is required . we can measure it through elasticity which is a measure of percentage change in quantity of of one or two factor(in terms of demand or supply) due to one percentage change in another factor. for instance we can measure how increase in price of software effect the demand for computer and mobiles. here in the question it is mentioned that due to change in A the other two factors (B &C ) has changed in opposite direction; the implication is that one factor is influenced positively with factor A while the other is affected negatively. so if we talk A,B,C are commodities then the two of them are substitutes and another combination is a complement.