Consider the following statements Other things remaining unchanged market demand for a good might in...........

Indian Economy Inflation

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Consider the following statements :

Other things remaining unchanged, market demand for a good might increase if

1. price of its substitute increases

2. price of its complement increases

3. the good is an inferior good and income of the consumers increases

4. its price falls

Which of the above statements are correct?

1 and 4 only

2, 3 and 4

1, 3 and 4

1, 2 and 3

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Explanation:

Let's evaluate each statement to see how they affect the market demand for a good:

- Statement 1: If the price of a substitute good increases, consumers might switch to the good in question, increasing its demand.

- Statement 2: If the price of a complementary good increases, the demand for the original good might decrease because the two goods are often used together.

- Statement 3: If the good is an inferior good and consumers' incomes increase, demand for the good might decrease because consumers can now afford better alternatives.

- Statement 4: If the price of the good falls, its demand typically increases due to the law of demand.

Now, let's match these with the given options:

- Option 1: 1 and 4 only

- Option 2: 2, 3, and 4

- Option 3: 1, 3, and 4

- Option 4: 1, 2, and 3

Correct Answer: Option 1 - 1 and 4 only