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Question
Explain any two causes of ‘increase’ in demand of a commodity.
Solution
An increase in demand of a commodity implies rise in the demand for a good due to a change in the factors other than the price of the good.
The following are the two causes of increase in demand.
(i) Rise in Income- With a rise in a consumer’s income, his purchasing power also increases. As a result, the consumer is able to purchase more of the goods. Hence, with the rise in income, the demand of the commodity also rises.
(ii) Increase in the Price of Substitute Goods- As the price of the substitute goods increases, the consumer shifts his demand away from the substitute goods. Hence, an increase in the price of the substitute goods results in a rise in the demand of a good.
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