Consider the following statements:Other things remaining unchanged, market demand for a good might increase if1.price of its substitute increases2.price of its complement increases3.the good is an inferior good and income of the consumers increases4.its price fallsWhich of the above statements are correct?

1. A

   1 and 4 only

   1 and 4 only. A dearer substitute and a fall in own price raise demand. A dearer complement cuts demand. Higher income cuts demand for an inferior good.

2. B

   2, 3 and 4

   2, 3 and 4. Complement-price up and inferior-good income up both reduce demand.

3. C

   1, 3 and 4

   1, 3 and 4. Statement 3 is false for an inferior good.

4. D

   1, 2 and 3

   1, 2 and 3. Own-price fall is the law of demand; 2 and 3 fail.

Summary. Official key is (a) 1 and 4 only. Demand rises if a substitute gets costlier or if the good’s own price falls. A costlier complement and a rise in income for an inferior good both reduce demand.