Question

In which of the following goods, increase in the price of one causes an increase in demand of another?

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

Answer 1

The correct option is C

Substitute goods

Increase in the price of one causes increase in the demand of another in the case of substitute goods. E.g. tea and coffee are substitute goods. This is because a rise in the price of coffee makes tea a relatively cheaper substitute.