If the price ofcommodity X increases because of the increase in the price vis-à-vis the...
If the price ofcommodity X increases because of the increase in the price vis-à-vis the increase in demand for other commodity Y, the two commodities are likely to be
- A) Complimentary
- B) Substitute
- C) Composite
- D) Intermediate
Correct Answer: A) Complimentary
Explanation
This question is asking about two commodities, X and Y, and how they relate to each other in terms of price and demand. If the price of commodity X goes up because there is an increase in demand for commodity Y, we need to determine the relationship between these two commodities.
The answer choices are: complimentary, substitute, composite or intermediate. Complimentary goods are those that are used together, such as bread and butter. Substitute goods are those that can be used in place of each other, such as coffee and tea. Composite goods are a combination of two or more goods, such as a car. Intermediate goods are goods that are used to produce other goods.
In this case, if the price of commodity X increases because of an increase in demand for commodity Y, then the two commodities are likely to be complimentary goods. This means that they are used together, and an increase in demand for one leads to an increase in demand for the other.
For example, if the price of peanut butter, which is commodity X, goes up because there is an increase in demand for jelly, which is commodity Y, then we can assume that peanut butter and jelly are complimentary goods. When people buy more jelly, they also buy more peanut butter to go with it.
To summarize, when the price of commodity X increases because of an increase in demand for commodity Y, the two commodities are likely to be complimentary goods.