UPSC Prelims 2021 – Question 54

Here is Question No. 54 a part of our series on UPSC Prelims 2021.

Q54. Consider the following statements: Other things remaining unchanged, market demand for a good might increase if

1. The price of its substitute increases
2. The price of its complement increases
3. The good is an inferior good and the income of the consumers increase
4. Its price falls

Which of the above statements is correct?
a) 1 and 4 only
b) 2, 3 and 4
c) 1, 3 and 4
d) 1, 2 and 3

Answer: (a)

The main influences on buying plans that change demand are:
Prices of related goods

• Income
• Expectations
• Number of buyers
• Preferences

The following are the relations between the demand and price of the products, with changing economic conditions:

1. The demand for a good increases, if the price of one of its substitutes rises. The demand for a good decreases, if the price of one of its substitutes falls.
2. The demand for a good increases, if the price of one of its complements falls. For example, ice cream and fudge sauce.
3. The demand for an inferior good decreases if income increases. The demand for a normal good increases if income increases.
4. If the Price of the good falls, then its demand increases

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