Question 4 - 3 Marks Questions - Chapter 1 Class 7 Economics - Introduction to Demand and Supply - Economics

What are two types of related goods and how do they affect demand?

Answer:

Answer by Student

• Two types of related goods are complementary goods and substitute goods .
  
  
• Complementary goods are goods that are used together, such as bread and butter, or car and petrol. When the price of one good increases , the demand for both goods decreases, and vice versa.
  
  
• Substitute goods are goods that can replace each other, such as tea and coffee, or apple and orange. When the price of one good increases , the demand for the other good increases, and vice versa.

Detailed Answer by Teachoo

• Related goods are goods that have some connection or influence on the demand for another good. There are two types of related goods: complementary goods and substitute goods .
  
  
• Complementary goods are goods that are consumed together and enhance the utility of each other. For example, bread and butter are complementary goods because they are usually eaten together and make a better combination than eating them separately. 
  
  
  • The demand for complementary goods depends on the price of both goods. When the price of one good increases, i t makes the combination more expensive and less affordable for consumers. Therefore, the demand for both goods decreases. For example, if the price of bread increases, consumers will buy less bread and also less butter. This can be shown by a leftward shift of the demand curve for both goods.
    
    
  • Similarly, when the price of one good decreases , it makes the combination cheaper and more attractive for consumers. Therefore, the demand for both goods increases. For example, if the price of butter decreases, consumers will buy more butter and also more bread. This can be shown by a rightward shift of the demand curve for both goods.
    
    
• Substitute goods are goods that can be used in place of each other and satisfy the same need or want. For example, tea and coffee are substitute goods because they are both hot beverages that can quench thirst and provide caffeine. 
  
  
  • The demand for substitute goods depends on the price of one good relative to the other. When the price of one good increases, it makes that good more expensive and less desirable for consumers. Therefore, the demand for that good decreases and the demand for the other good increases . For example, if the price of coffee increases, consumers will buy less coffee and more tea. This can be shown by a leftward shift of the demand curve for coffee and a rightward shift of the demand curve for tea.
    
    
  • Similarly, when the price of one good decreases , it makes that good cheaper and more appealing for consumers. Therefore, the demand for that good increases and the demand for the other good decreases . For example, if the price of tea decreases, consumers will buy more tea and less coffee. This can be shown by a rightward shift of the demand curve for tea and a leftward shift of the demand curve for coffee