Question

If price of x increases, the demand for y too increases. How are x and y related?

Options

• as complementary goods

• as inferior goods

• as substitute goods

• as unrelated goods

Answer 1

as substitute goods

Explanation:

When two goods are substitutes, one can be used in place of the other. For example, tea and coffee are substitute goods. If the price of tea (x) increases, consumers may buy more coffee (y) instead, as coffee becomes relatively cheaper.