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Explain with the help of diagrams, the effect of the following changes on the demand of a commodity: (i) A rise in price of Substitute good. (ii) A rise in price of Complementarygood. |
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Answer» Solution :(i) A rise in price of Substitute good (a)Substitute goods are the goods that can be used in place of another goods and give the same satisfication to a consumer.  (b)There would always exist a direct relationship between the price of substitute goods and demand for given commodity. (C ) Due to rise in price of substitute (Say Coffee from Rs 500 to Rs 550), the demand of tea and SHIFT rightward from DD to `D_(1)D_(2)` as shown in given figure: (II) A rise in price in Complementary good  (a)Complementary goods are those which are useless in the absence of another good and which are demanded jointly. (b) There would always exist an inverse relationship between price of complementary goods and demand for given commodity. (c ) Due to rise in price of Comple mentary good (Say Tea from Rs 500 to Rs 550), the demand of SUGAR shift LEFTWARD from DD to `D_(1)D_(1)` , as shown in given figure. |
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