ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Substitutes: The goods that are consumed in place of one another and satisfies the same set of wants. For example, Hot Tea and Hot Coffee. If the price of a good increase, the demand for it’s cheaper substitutes increases and vice-versa.

Detailed explanation-2: -If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.

Detailed explanation-3: -Normal goods are products such as food, clothing, and household appliances. Demand for normal goods increase as income rises. The income elasticity of demand formula measures the change in demand to a change in income.

Detailed explanation-4: -An increase in the price of substitute goods leads to an increase in the demand for given commodity and vice versa. Eg. if price of a substitute good say coffee increases then demand for given commodity say tea will rise as tea will become relatively cheaper in comparison to coffee.