Advertisements
Advertisements
Question
Distinguish between substitute goods and complementary goods, with examples.
Solution
The difference between substitute goods and complementary goods is given as follows:
| Basis | Substitute Goods | Complementary Goods |
| Definition | Substitute goods refer to those goods that can be consumed in place of each other. | Complementary goods refer to those goods that are consumed together. |
| Relationship with Price | In the case of substitute goods, if the price of one good increases, the consumer shifts his demand to the other (substitute) good i.e. rise in the price of one good results in a rise in the demand of the other good and vice-versa. | In the case of complementary goods, if the price of one good increases then a consumer reduces his demand for the complementary good as well, i.e. a rise in the price of one good results in a fall in demand of the other good and vice-versa. |
| Examples | Tea and coffee, Colgate and pepsodent, cello pens and Reynolds pen | Tea and sugar, ink pen and ink, printer and paper |
APPEARS IN
RELATED QUESTIONS
Demand for necessaries is................
(elastic / inelastic / infinitely elastic / unitary elastic)
Explain, with reasons, whether you Agree or Disagree with the following statement
There are no exceptions to the Law of Demand.
When does ‘decrease’ in demand take place?
Demand deposits include (choose the correct alternative)
(a) Saving account deposits and fixed deposits
(b) Saving account deposits and current account deposits
(c) Current account deposits and fixed deposits
(d) All types of deposits
Demand for electricity is elastic.
Give reason or Explain the following statement :
Demand for habitually used goods is inelastic.
Give one reason for shift in demand curve.
Define or explain the following concept :
Effective demand .
Fill in the blank using proper alternatives given in the bracket:
Demand for salt is ...............
Explain the following concepts or give definitions.
Demand
Match the following:
|
Group A
|
Group B
|
|
1. Demand and price
|
a. Substitute goods
|
|
2. Tea and coffee
|
b. Inverse relation
|
|
3. Inferior goods
|
c. Joint demand
|
|
4. Factors of production
|
d. Distribution of income
|
|
5. Pen and ink
|
e. Composite demand
|
|
|
f. Giffen goods
|
|
|
g. Indirect demand
|
State whether the following statement is TRUE and FALSE
Demand curve slopes upward from left to right.
Define or explain the following concept:
Direct demand
Fill in the blank using appropriate alternatives given below
The demand for perishable goods is _______
Increase in price of substitute goods leads to ______
Identify the correct pair of items from the following Columns I and II:
| Column I | Column II |
| (1) Budget Line | (a) Normal goods |
| (2) Bajra | (b) Inferior goods |
| (3) Consumer equilibrium | (c) Luxurious goods |
| (4) Elastic Demand | (d) M = Px*x + py*y |
Read the following news report and answer the Q.97-Q.100 on the basis of the same:
The quantity of a commodity that a consumer is willing to buy and is able to afford, given the prices of goods and the consumer's tastes and preferences is called demand for the commodity. Whenever one or more of these variables change, the quantity of the good Chosen by the consumer is likely to change as well. The relation between the consumer's optimal choice of the quantity of a good and its price is very important and this relation is called the demand function. Thus, the consumer's demand function for a good gives the amount of the good that the consumer chooses at different levels of its price when the other things remain.
The price elasticity of demand for a good depends on ______ and ______ of the good.
Which of the following statement is true?
Read the case study and answer the questions 97 to 100:
The Coca-Cola Company is an American multinational beverage company, with its headquarters in Atlanta, Georgia. The first company that conducted its operation in the soft drink industry was Coca-Cola. It is the world's largest non-alcoholic beverage company serving more than 1.8 billion consumers daily in more than 200 countries. It has a portfolio of more than 3,500 (more than 800 no or low-calorie) products. However, the company is best known for its flagship product Coca-Cola which was originally intended to be a patented medicine invented in 1886 by pharmacist John Smith Pemberton in Columbus, Georgia. The Coca-Cola products can be termed as normal goods and in August 2019 Coca-Cola introduced a new product into the market, that is, zero sugar where the demand has increased for the product in the market.
According to the council of the Australian Food Technology Association and Institute of Food Science and Technology, the Australian nonalcoholic beverages industry has been growing steadily, with a 2.3 percent increase in overall production in the year 2000 which amounts to 2.25 billion liters. However, in the re~ent years, sales of customary carbonated soft drinks have dropped as more and more customers become health conscious and move away from high-calorie sugary drinks. Soft Carbonated drinks. and other alcohol-free beverage manufacturers have also sensed the effects of intensifying competition from private-label soft drink makers. Nevertheless, sales of greater value energy and sports drinks have driven profit generation in the industry.
What has happened to the demand of zero sugar carbonated drinks?
In an open economy, Aggregate Demand is estimated as:
