Other things remaining unchanged, market demand for a good might increase if:
1. price of its substitute incre

Question

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?

Accepted Answer

An increase in the price of a substitute good leads consumers to switch to the relatively cheaper original good, thus increasing its demand. A fall in the price of a good, ceteris paribus, leads to an increase in quantity demanded according to the law of demand. For an inferior good, as consumer income rises, demand for it falls, meaning demand increases as income falls or if the good becomes relatively cheaper compared to normal goods.