If an increase in the price of Y leads to an increase in the consumption of...

If an increase in the price of Y leads to an increase in the consumption of X, how would you describe the relationship between X and Y?

X and Y are both normal

X and Y are both inferior

X is a complement for Y

X is a substitute for Y

Expert Solution

Two goods X and Y are consider as substitute goods if increase in price of Y results in increase in demand or consumption of X. Here, increase in the price of Y results in increase in the consumption of X. Hence X is a substitute of Y. Thus option (d) is the correct answer.

A good is a normal good if Increase in income results in increase in demand of that good. Here there is no information regarding income and thus option (a) is incorrect.

A good is an inferior good if Increase in income results in decrease in demand of that good. Here there is no information regarding income and thus option (b) is incorrect.

Two goods X and Y are consider as complementary goods if increase in price of Y results in decrease in demand or consumption of X. Here, increase in the price of Y results in increase in the consumption of X. Hence X is not a complement of Y. Thus option (c) is incorrect.

Hence the correct answer is (d) X is a substitute for Y.

Rahul Sunny answered 2 years ago

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