Answer to Question #26108 in Microeconomics for ovais

Question

Q1. What happens to demand when the following changes occur?
a. The price of the commodity falls.
b. Income increases and the commodity is normal.
c. Income increases and the commodity is inferior.
d. The price of substitute good increases.
e. The price of a complement good decrease.

Answer 1

a. The price of the commodity falls.
The quantity demanded rises, the demand is unchanged. It is a move along the demand
curve.
b.Income increases and the commodity is normal.
The demand increases. If commodity is normal, the income increase causes the
increase of the demand for normal goods.
c.Income increases and the commodity is inferior.
The demand decreases. If commodity is inferior, the income increase causes the decrease of the demand
for the good.
d.The price of substitute good increases.
The demand rises. The demand for substitutes is inversely proportional
depending on their prices.
e. The price of a complement good decrease.
The demand rises. The demand for complements is proportional depending on their prices.