ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -We determine whether goods are complements or substitutes based on cross price elasticity-if the cross price elasticity is positive the goods are substitutes, and if the cross price elasticity are negative the goods are complements.

Detailed explanation-3: -As the price of milk rises, quantity demanded falls because: (1) People consume less milk. (2) Some people drop out of the market for milk and drink tea or orange juice instead.

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