How Does a Substitute Good's Price Affect Equilibrium: The Case of X and Y

If goods X and Y are substitutes in production, it means they can be used interchangeably during manufacturing. A decrease in the price of Y would incentivize producers to choose Y over X.

Consequently, the demand for good X would decline, leading to a decrease in both its equilibrium price and quantity. Producers, enticed by the lower cost, would shift production towards using more of Y, causing a decrease in the demand for X and subsequently lowering its price. This price reduction would then lead to a decrease in the quantity of X both supplied and demanded in the market.