Question

Q16. Explain with the help of the diagrams, the effect of following changes on the demand of a commodity: a) Change in the income of the consumer b) Unfavorable change in the taste of buyer for the commodity
change in price of related goods
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Answer 1

Answer:

Demand for a commodity will decrease when there is a fail in the price of substitute goods. Implying that demand curve would shift backward: less will be purchased at the same price. Demand for commodity falls from PK to PK1. Fig. (a) illustrates this situation. (ii) Demand for a commodity will decrease also when there is a fall in income of the consumer (assuming that the commodity demanded is a normal good). This would imply a backward shift in demand curve: less goods will be purchased at the same price. Demand for a commodity falls from PK to PK1. Fig. (b) illustrates this situation.

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