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Q34 (IAS/2021) Economy › Basic Concepts & National Income › Demand theory basics Official Key

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?

Result
Your answer: —  ·  Correct: A
Explanation

The correct answer is Option 1 (1 and 4 only). Market demand for a good increases due to the following reasons mentioned in the statements:

  • Statement 1 is correct: Substitutes are goods used in place of each other. If the price of a substitute (e.g., coffee) increases, consumers switch to the original good (e.g., tea), thereby increasing its market demand.
  • Statement 4 is correct: According to the Law of Demand, an inverse relationship exists between price and quantity demanded. Other things being equal, a fall in the price of a good leads to an increase in its demand.

Why other statements are incorrect:

  • Statement 2 is incorrect: Complements are used together (e.g., cars and petrol). If the price of a complement increases, the demand for the original good decreases.
  • Statement 3 is incorrect: For inferior goods, demand decreases as consumer income increases, as consumers shift toward superior or normal goods.
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Consider the following statements : Other things remaining unchanged, market demand for a good might increase if 1. price of its substitu…
At a glance
Origin: Books + Current Affairs Fairness: Moderate fairness Books / CA: 5/10 · 5/10
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Statement 1
Does an increase in the price of a substitute good, ceteris paribus, increase the market demand (shift the demand curve) for the original good?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.4.5 Shifts in the Demand Curve > p. 25
Presence: 5/5
“If there is an increase in the price of a substitute good, the demand curve shifts rightward. On the other hand, if there is an increase in the price of a complementary good, the demand curve shifts leftward. The demand curve can also shift due to a change in the tastes and preferences of the consumer. If the consumer's preferences change in favour of a good, the demand curve for such a good shifts rightward. On the other hand, the demand curve shifts leftward due to an unfavourable change in the preferences of the consumer. The demand curve for ice-creams, for example, is likely to shift rightward in the summer because of preference for ice-creams goes up in summer.”
Why this source?
  • Directly asserts that an increase in the price of a substitute good causes the demand curve to shift rightward.
  • Provides the directional effect (rightward shift) under ceteris paribus conditions.
  • Contrasts substitute effect with complementary goods to clarify sign of the shift.
Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.4.6 Movements along the Demand Curve and Shifts in the Demand Curve > p. 26
Presence: 4/5
“As it has been noted earlier, the amount of a good that the consumer chooses depends on the price of the good, the prices of other goods, income of the consumer and her tastes and preferences. The demand function is a relation between the amount of the good and its price when other things remain unchanged. The demand curve is a graphical representation of the demand function. At higher prices, the demand is less, and at lower prices, the demand is more. Thus, any change in the price leads to movements along the demand curve. On the other hand, changes in any of the other things lead to a shift in the demand curve.”
Why this source?
  • States that the demand depends on prices of other goods and that changes in those prices lead to shifts in the demand curve.
  • Distinguishes shifts in the demand curve (caused by other factors) from movements along the curve (caused by own-price changes).
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Statement analysis

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Statement analysis

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SIMILAR QUESTIONS

CDS-II · 2023 · Q3 Relevance score: 5.09

Other things remaining constant, the market supply for a good increases if: 1. its price increases. 2. price of its factors of production decreases. 3. price of other goods decreases.

CDS-II · 2014 · Q93 Relevance score: 4.85

Which of the. following statements is /are true ? 1. If increase in demand and supply are of equal magnitude, the price will remain unchanged, but the equilibrium quantity will increase. 2. If increase in demand is of greater magnitude than increase in supply, both equilibrium price and equili- brium quantity will increase. 3. If increase in supply is of greater . magnitude than increase in demand, equilibrium price will fall byt equilibrium quantity will increase. Select the correct answer using the code given below:

CDS-II · 2024 · Q25 Relevance score: 1.94

Suppose there are only two normal goods in the economy, X and Y. If price of good X increases, which would be the correct statement from below? (a) Demand for good X decreases and demand for Y indeterminate. (b) Demand for good X decreases and demand for Y decreases. (c) Demand for good X increases and demand for Y is indeterminate. (d) Demand for good X increases and demand for Y decreases.

IAS · 2012 · Q4 Relevance score: 0.89

Consider the following statements : The price of any currency in international market is decided by the 1. World Bank 2. Demand for goods/services provided by the country concerned 3. Stability of the government of the concerned country 4. Economic potential of the country in question Which of the statements given above are correct ?

CDS-I · 2019 · Q111 Relevance score: 0.66

Which one of the following is not an assumption in the law of demand?