Question
Distinguish between substitute goods and complementary goods, with examples.
OR
Explain the meaning of substitute and complementary goods with the help of suitable examples.

Answer

Substitute goods: Substitute goods are those goods which can be used in place of each other to satisfy a given want, e.g., Tea and Coffee, Ghee and Refined oil. In case of substitute goods, an increase in the price of one good causes an increase in the demand of the other good. For example, an increase in the price of coffee, causes an increase in the demand for tea. Thus, there is a positive relation between price of a substitute and the demand for the given good.
Complementary goods: Complementary goods are those goods which are used together to satisfy a given want. They are demanded jointly, e.g., car and petrol, pen and ink. In case of complementary goods, an increase in the price of one good causes a decrease in the demand of the other good. For example, an increase in the price of petrol, causes a decrease in the demand for car. Thus, there is an inverse relation between the price of a complementary good and demand for the given good.

Need a full question paper?

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

Start Generating Free

Similar questions

Due to $10$ percent rise in the price of a commodity, its quantity supplied rises from $400$ units to $450$ units. Calculate its price elasticity of supply.
Complete the following table:
Units of Labour
(Q) Average Product (Units)
Marginal Products (Units)
1
8
-
2
10
-
3
-
10
4
9
-
5
-
4
6
7
-
Market for a good is in equilibrium. What is the effect on equilibrium price and quantity if increase in market demand is less than increase in market supply? Use diagram.
Define indifference curve. Explain the three properties of indifference curves.
OR
Explain the three properties of indifference curve.

OR
Explain the three properties of indifference curve.

OR
State and explain three properties of indifference curves.
Give reasons for the following statements:
  1. Demand curve facing a perfectly competitive firm is a horizontal straight line.
  2. Demand curve facing a monopolistic competitive firm is a downward sloping curve.
  3. Demand curve facing a monopoly firm is less elastic than that curve facing a monopolistic competitive firm.
Under what condition, a producer would like to supply more at a given level of price?
OR
What is increase in supply? Explain three causes of increase in supply.

OR
State factors that can cause a rightward shift of supply curve.
Explain the distinction between change in demand and change in quantity demanded of a commodity.
OR
Explain the distinction between a shift in demand curve and a movement along the demand curve. Use diagram.
What is a false base line? What is its purpose? Give an example.
From the following data regarding cost of a firm, calculate:
  1. Average fixed and
  2. Average variable cost:
    Output
    0
    1
    2
    3
    4
    5
    6
    Total Cost ()
    60
    78
    90
    102
    112
    120
    126
Explain with the help of diagram the effect of the following changes on the demand of a commodity.
  1. An unfavorable change in the taste of the buyer for the commodity.
  2. A fall in the income of the buyer, if the commodity is inferior.