What will be the effect of an increase in the price of palm oil on the demand for soya oil? State the relationship between two products.

The effect of an increase in the price of palm oil on the demand for soya oil can be explained using the concept of substitute goods in economics.

Step 1: Understanding Substitute Goods Substitute goods are goods that can be used in place of one another. In this case, palm oil and soya oil can both be used for similar purposes (like cooking), so they can be considered substitute goods.

Step 2: Price Increase of Palm Oil When the price of palm oil increases, it becomes more expensive for consumers to purchase.

Step 3: Consumer Reaction As a result, consumers will start looking for cheaper alternatives to palm oil. Since soya oil is a substitute good, consumers may start buying more soya oil instead.

Step 4: Increase in Demand for Soya Oil This shift in consumer behavior will lead to an increase in the demand for soya oil.

So, the relationship between the two products is that they are substitute goods. When the price of one increases, the demand for the other also increases.