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Question
Explain how quantity demanded for commodity X will be affected by Government policy.
Solution
The demand for commodity X will change depending on government policy. If the government levies taxes on commodities in the form of sales tax, excise duty, VAT, and so on, the price of these commodities will rise. As a result, the demand for this commodity will decrease. However, if the government spends more money on road and bridge construction, industrial development, and so on, the demand for cement, iron, and other items required for these purposes would rise, as will the price of this commodity if it is on the list.
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RELATED QUESTIONS
Goods X and Y are complements when they are ______.
From the set of statements given in Column I and Column II, choose the correct pair of statements:
| Column I | Column II |
| A. Normal goods | (i) Goods the demand for which tends to fall with increase in income. |
| B. Inferior goods | (ii) Goods which cannot be used in place of one another. |
| C. Substitute goods | (iii) Goods which can be used in place of one another. |
| D. Joint demand | (iv) Goods the demand for which rise with increase in income. |
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