UPSC CSE Prelims
Question 49
Consider the following statements: Other things remaining unchanged, market demand for a good might increase if
- price of its substitute increases
- price of its complement increases
- the good is an inferior good and income of the consumers increases
- its price falls
Which of the above statements are correct?
View correct answer and explanation
Correct answer: A
Correct Option: A (1 and 4 only)
Explanation: A substitute becoming costlier can raise demand for the good; a fall in the good’s own price raises quantity demanded along its demand curve. Costlier complements and higher income for inferior goods work oppositely.
Statement / Pair / Item-wise Analysis:
1. Correct / qualifies - A higher substitute price shifts demand toward the good.
2. Incorrect / does not qualify - A higher complement price generally lowers demand for the paired good.
3. Incorrect / does not qualify - Higher income generally reduces demand for an inferior good.
4. Correct / qualifies - A fall in the good’s own price raises quantity demanded, interpreted as demand increasing here.
Option-wise Analysis:
A. Correct-selects exactly the supported statements/items: 1, 4.
B. Incorrect-includes item 2, which is not valid (A higher complement price generally lowers demand for the paired good); includes item 3, which is not valid (Higher income generally reduces demand for an inferior good); omits valid item 1 (A higher substitute price shifts demand toward the good).
C. Incorrect-includes item 3, which is not valid (Higher income generally reduces demand for an inferior good).
D. Incorrect-includes item 2, which is not valid (A higher complement price generally lowers demand for the paired good); includes item 3, which is not valid (Higher income generally reduces demand for an inferior good); omits valid item 4 (A fall in the good’s own price raises quantity demanded, interpreted as demand increasing here).
Review note: Strict economics distinguishes a movement along demand from a shift of the demand curve. The supplied key counts a fall in own price as “market demand” rising.