Explain how the demand for a good is affected by the prices of its related goods. Give examples.
How much the consumer would like to buy a given commodity depends on the relative price of other related goods such as substitutes or complementary goods to a commodity.
The demand for a commodity depends on the relative prices of its substitutes. If the substitutes are relatively costly, then there will be more demand for that commodity at a given price and vice versa. Example Tea and Coffee
Similarly, the demand for a commodity is also affected by its complementary products. When in order to satisfy a given want, two or more goods are needed in combination, these goods are referred to as complementary goods. Example pen and ink
A consumer consumes only two goods X and Y. State and explain the conditions of consumer's equilibrium with the help of utility analysis.
Define 'Market-supply'. What is the effect on the supply of a good when Government imposes a tax on the production of that good? Explain.
What is a supply schedule? What is the effect on the supply of a good when Government gives a subsidy on the production of that good? Explain.
What is meant by producer's equilibrium? Explain the conditions of producer's equilibrium through the 'total revenue and total cost' approach. Use diagram.
Market for a good is in equilibrium. There is an 'increase' in demand for this good. Explain the chain of effects of this change. Use diagram.
