An increase in the price of milk causes a decrease in the demand for cereal. The two products are13. Advertising, fashion trends, and new product introductions serve toa. create consumer needs. b. increase income effectiveness.c. create consumer demand. d. minimize the income effect.14. Because a modest price increase has little or no effect, the demand for the product isa. complementary. b. inelastic. c. elastic. d. unit elastic.

DEMAND

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	substitutes.
B	complements.
C	unrelated.
D	demand elastic.

Explanation:

Detailed explanation-1: -Complementary goods have a negative cross-price elasticity of demand. This means that an increase in the price of one good causes a decrease in the demand for the other good. Therefore, as the price of milk increases and cereal is a complement good to milk, then we would expect the demand for cereal to decrease.

Detailed explanation-2: -Economists call this the Law of Demand. If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases.

Detailed explanation-3: -Answer and Explanation: If a decrease in the price of one commodity causes a fall in demand for another commodity, the two goods are substitutes.

Detailed explanation-4: -The demand for a good increases, if the price of one of its complements falls. The demand for a good decreases, if the price of one of its complements rises. The demand for a normal good increases if income increases. The demand for an inferior good decreases if income increases.

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

DEMAND