Question

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> Consider the following about Substitute goods.
1) Increase in price of a good leads to increase in demand of the other good.
2) Increase in price of a good leads to decrease in demand of the other good. Select the correct alternative

Which of the following statements is/are correct?

• A. 1 Only
• B. 2 Only
• C. Both 1 and 2
• D. None of the above

Answer 1

The correct option is A 1 Only

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> Substitute goods like tea and coffee are inversely related to each other. Increase in price of one good increase the demand for other while in case of complementary good increase in price leads to decrease in demand of other. eg. car and petrol.