ECONOMICS (CBSE/UGC NET)

Detailed explanation-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.

Detailed explanation-2: -The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good compared to that of other substitute goods. For example, when the price of a good rises, it becomes more expensive relative to other goods in the market.

Detailed explanation-3: -When two goods are substitutes in consumption, then a rise in the price of one good will increase Demand (shift right) for the other good and the reverse for a decrease in the price of the first good. This happens because the consumer(s) can substitute from the consumption of one good to the consumption of the other.

Detailed explanation-4: -two goods are substitutes if a decrease in the price of one good causes a decrease in demand for the other. two goods are complements if a decrease in the price of one good causes an increase in the demand for the other. a good is normal if a decrease in income causes a decrease in demand for the good.