How is demand for a good affected by a rise in the prices of other goods? Explain?
Answers
if there is rise in the price of other good consumer refer to that good which price is low hence the demand of that good increase
First of all, when the demand for goods is affected by price of other good so goods is substitute or complementary...
In the case of substitutes good.
= For example Tea and coffee
When the price of coffee increase so the consumer shift to the tea and the demand of tea will be increased or vice- versa.There is positive relationship between price of one good and quantity demanded for other goods.
In the case of complementary goods
= For example Car and petroleum
When the price of petrol increase so the demand of car will be decrease because those consumer who planning to buy a car so he can't buy car due to the increasing of price of petrol. There is negative relationship between price of one good and quantity demanded of other good.