Two goods X and Y are such a combination that, when the price of good Y increases, the demand for good X increases,
How are goods X and Y related?
Two goods X and Y are such a combination that, when the price of good Y increases, the demand for good X increases,
How are goods X and Y related?
Solution
Option 1 -> Complementary goods are used together, so when price of one increases, demand for the other decreases.
Option 2 -> Substitute goods can replace each other, so when price of one increases, demand for the other increases.
Option 3 -> Inferior goods relate to income changes, not price relationships between two goods.
Option 4 -> Supplementary goods are similar to complementary goods, used together.
Hence, substitute goods -> When the price of good Y increases, consumers switch to good X as an alternative, causing the demand for X to increase. This is the defining characteristic of substitute goods - they can replace each other in consumption. Examples include tea and coffee, butter and margarine, or Coke and Pepsi. -> correct
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