Question

How are the two goods (apples and oranges) related when, as a result of rise in the price of apples, demand for oranges increases?

• A. Substitute Goods
• B. Complementary Goods
• C. Normal Goods
• D. Inferior Goods

Answer 1

The correct option is A Substitute Goods

A substitute good is a good that can be used in place of another. It is a good with a positive cross elasticity of demand.

This means a good's demand is increased when the price of another good is increased; both in the same direction.

For example, if apples and oranges are substitutes for a consumer, then if the price of apples increases, the consumer will buy less of apples and more of oranges. Thus, when price of apples increases, the demand for oranges will rise.