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Question
What do you mean by substitutes? Give examples of two goods which are complements of each other.
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Solution
Those goods that can be consumed in place of other goods are called substitute goods. Example: Tea and coffee are goods that can be substitutes for each other. If the price of tea increases, then the demand for tea will decrease and people will substitute coffee for tea, which will increase the demand for coffee.
The demand for a good moves in the same direction as the price of its substitutes.
Price of tea (PT) increases →Demand for tea (DT) decreases →Demand for coffee (DC) increases.
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RELATED QUESTIONS
Explain the factors determining the elasticity of demand.
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The concept of elasticity of demand is useful in economic theory.
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| Price of Pen (₹) | Demand for Pen |
| 10 | 500 |
| `square` | 400 |
| 30 | `square` |
| `square` | 200 |
| 50 | `square` |
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Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
mention any two examples of composite demand.
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