Explain the effect of following on the demand for a good: (a) Fall in price of substitute good. (b) Rise in income of the consumer in case of inferior good.
Answers
(a) Fall in price of substitute good:- When the price of a good that complements a good decreases then the quantity demanded of one increases and the demand for the other increases and when the price of asubstitute good decreases the quantity demanded for that good increases but the demand for the good that it is being substituted for decreases.
(b) Rise in income of the consumer in case of inferior good:- In economics an inferior good is a good whose demand decreases when consumer income rises or demand increases when consumer income decreases unlike normal goods for which the opposite is observed and normal goods are those goods for which the demand rises as consumer income rises.
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