Question

Explain the change in demand for a good on account of change in prices of related goods

Answer 1

Heya....

Related goods are.....

--->>> Substitution goods....

Those goods which can be exchange to each other ..Such as tea and coffee...

It's impact is +ve....

* If price of substitution good RISES then the demand of given goods also rise , consumer shift to given good from substitution good....

* If price of substitution good FALLS then present good also less demanded due to consumer shift to less priced substitution good...

--->>> Complementary goods.....

Thode goods which complete the demand of other one...Such as car and petrol....

It's impact is -ve....

* If price of complementary goods RISES then present demand of given good is decreased , consumer can't operate high cost ....

* If the prices FALLS then consumer will buy more good having complement....

** Hope u get ur answer...

Answer 2

When price of a substitute good rises, the given good becomes relatively cheaper. As a result, its demand rises. Opposite happens when price of the substitute good falls. ... Demand for the given commodity is also affected by change in price of the related goods