What effect, if any, will each of the following have upon the location of the demand curve for resource J that is being used in the production of commodity X? If there is uncertainty as to the precise effect, explain the sources of that uncertainty.

a. A decline in the demand for product X.

b. An increase in the price of Y, a substitute product for X.

c. A decline in the price of substitute resource K.

d. An increase in the price of complementary resource L.

A. A decline in the demand for product X:

Explanation: A decline in the demand for product X will result in decrease in production of good X, since the decline in demand will makes the price of good X to go down. At lower price, lower output of good X will be produced, which in turn would reduce the demand for input J. The decrease in demand for input J, supply of J being constant, would lead to leftward shift in the demand of J, which in turn will reduce the price of J.

B.An increase in the price of Y, a substitute of product for X:

Explanation: Increase in price of Y will lead to increase in quantity demanded of good X. When the quantity demanded of good X increases, it will lead to increase in quantity demanded of J. This will make the demand curve of J shift to the right, supply of J remaining same. This in turn will lead to increase in the price of J.

C. Decline in price of substitute resource K:

Explanation: When there is decline in prices of substitute resource K, it will be cost effective for the producers of good X to use K as input instead of J. This will lead to decrease in the demand for J. The supply of J being constant, decrease in demand of J will lead to leftward shift in the demand curve, making the price of J to decrease.

D. Increase in price of complimentary resource I:

Explanation: Increase in price of complimentary resource I would make the demand of J to fall down as both I and J are jointly demanded. The decrease in demand of J will make the demand curve of J to shift to the left, thereby leading to decrease in price of J.