Related goods are either substitutes or complements. When price of a substitute good rises, the given good becomes relatively cheaper. As a result, its demand rises. Opposite happens when price of the substitute good falls. Show When price of a complementary good rises, its demand falls, Since the given good is used jointly with the complementary good, the demand of the given good also falls. This establishes inverse relation between price of a complementary good and demand for the given good. Demand for the given commodity is also affected by change in price of the related goods. Related goods are of two types: (i) Substitute goods: Substitute goods are those goods which can be used in place of one another for satisfaction of a particular want, like tea and coffee. 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. So demand for a given commodity is directly affected by change in price of substitute goods. (ii) Complementary goods: Complementary are those goods which are used together to satisfy a particular want, like car and petrol. An increase in the price of complementary goods leads to a decrease in the demand for given commodity and vice versa. For example if price of a complementary good (say petrol) increases, then demand for given commodity (say car) will fall as it will be relatively costlier to use both the goods together. How does a change in the price of related goods affect the demand of the given good?When the price of a good that complements a good decreases, then the quantity demanded of one increases and the demand for the other increases. When the price of a substitute good decreases, the quantity demanded for that good increases, but the demand for the good that it is being substituted for decreases.
How does the price of related goods affect demand example?So if the demand for one of the two goods is increased, the demand for the other commodity will decrease even if the price of this commodity remains the same and vice versa. Example: coffee and tea, soft drink and fruit juice etc.
How do prices of related goods affect the price of give goods explain 5?Related goods are either substitutes or complements. When price of a substitute good rises the given good becomes relatively cheaper. As a result its demand rises. Opposite happens when price of the substitute good falls.
How does a change in the price of related goods affect the supply of a commodity?At higher prices the supply of a commodity increases. This increases the profitability of the producer. The supply of a product not only depends on its price but also price of other goods- The increase in price of the other good is more profiable the producer will shift production and increase the supply of that good.
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How does change in the price of related goods affect the demand of the given goods use diagram?
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