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 an inferior good and income of the consumers increases
- 4.its price falls
Which of the above statements are correct?
Answer & explanation
Answer: (a) 1 and 4 only
Demand for a good rises when a substitute gets dearer and when its own price falls. A dearer complement and higher income for an inferior good both push demand down.
- ✓ 1. If coffee becomes costlier, buyers switch to tea, its substitute, so demand for tea goes up.
- ✗ 2. Complements are used together (tea and sugar), so a rise in the complement's price reduces demand for the good.
- ✗ 3. By definition, demand for an inferior good such as coarse cereals falls as consumers' income rises and they shift to better goods.
- ✓ 4. The law of demand: other things equal, a lower price raises the quantity demanded.
Remember · Demand rises with: dearer substitute, cheaper complement, own price falling, and (for normal goods) higher income. Inferior goods reverse the income effect.
📘 Read it in NCERT: Class 12 Introductory Microeconomics, Ch 2 (practise this chapter) · Class 12 Introductory Microeconomics, Ch 2 (practise this chapter) · Class 12 Introductory Microeconomics, Ch 2 (practise this chapter) · Class 12 Introductory Microeconomics, Ch 2 (practise this chapter)
Sources
- NCERT Class 12 · Introductory Microeconomics, Chapter 2 “Since tea is a substitute for coffee, if the price of coffee increases, the consumers can shift to tea, and hence, the consumption of tea is likely to go up.”
- NCERT Class 12 · Introductory Microeconomics, Chapter 2 “In general, the demand for a good moves in the opposite direction of the price of its complementary goods.”
- NCERT Class 12 · Introductory Microeconomics, Chapter 2 “The demand for an inferior good decreases (increases) as the income of the consumer increases (decreases).”
- NCERT Class 12 · Introductory Microeconomics, Chapter 2 “Law of Demand states that other things being equal, there is a negative relation between demand for a commodity and its price.”
Question and answer: UPSC's official GS Paper I (2021, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·