Answer to Question #261548 in Macroeconomics for Vasan

Question

b. What will happen to the quantity demanded when price of a substitute of commodity X increases?

d. When both the price of a substitute and the price of a complement of commodity X rise, the demand for X?

C. What will happen to the quantity demanded when price of a complement of commodity X increases?

1. a. State law of demand with graphical representation

Answer 1

b) Substitute products are two different items that can be used for the same purpose. It's a product or service that a customer perceives to be the same as or comparable to another. When the price of a substitute increases, the quantity demanded of commodity X will rise.

d) When both the price of a substitute and the price of a complement of commodity X rise, the demand for X can rise, fall or remain unchanged

c) When the price of a complement of commodity X increases, the quantity demanded will rise. Complements have a proportional demand based on their prices.

1.a) When all other parameters are held constant, the law of demand holds that the quantity demanded of a good has an inverse relationship with its price. It simply means that as the price rises, demand falls.