Question

The demand for a Good X increases when the price of its substitute ______ OR when the price of its complements ______.

Options

• rises: rise

• rises: falls

• falls: rises

• falls: falls

Answer 1

The demand for a Good X increases when the price of its substitute rises OR when the price of its complements falls.

Explanation:

The demand for a good X increases when the price of its substitute rises (because consumers switch from the now more expensive substitute to good X), or when the price of its complement falls (because the lower price of the complement increases its demand, which in turn increases the demand for good X).