Question

A, B and C are three commodities, where A and B are complementary; whereas A and C are substitutes. With increase in price of commodity A ______.

Options

• Demand of all the commodities A, B and C will fall

• Demand of commodities A and B will fall, whereas demand of C will rise

• Demand of commodities A and C will fall, whereas demand of B will rise

• Demand of commodities B and C will fall, whereas demand of A will rise

Answer 1

A, B and C are three commodities, where A and B are complementary; whereas A and C are substitutes. With increase in price of commodity A demand of commodities A and B will fall, whereas demand of C will rise.

Explanation:

A higher price of A reduces its quantity demanded and, because B is complementary, reduces demand for B. C is a substitute for A, so demand for C rises.