Q. Consider the following statements: Other things remaining unchanged market demand for a good might increase if
1. Price of its substitute increases
2. Price of its complement increases
3. The good is and inferior good and income the consumers increases
4. Its price falls
Which of the above statements are correct?
Why this question) Important static concept
Exp) Option a is correct.
The main factors that can increase the demand for a good in market are:
- Prices of related goods
- Number of buyers
The following are the relations between the demand and price of the products, with changing economic conditions:
- The demand for a good increase, if the price of one of its substitutes rises. The demand for a good decrease, if the price of one of its substitutes falls.
- The demand for a good increase, if the price of one of its complement’s falls. For example, ice cream and fudge sauce.
- The demand for an inferior good decrease if income increases. The demand for a normal good increase if income increases.
- If the Price of the good falls, then its demand increases.
Source) ch04lecture.ppt (unf.edu)