Suppose there is a direct relationship between the quantity demanded of a consum

Question

Suppose there is a direct relationship between the quantity demanded of a consumer good and the price of a related service. Circle the letter or letters corresponding to statements that must be true. Note that the correct response may require that you circle all, none or any combination of letters. The good and the service must be substitutes. The good and the service must be complements. When the market price of the service increases, the quantity offered for sale of the consumer good will increase. Other things equal, it means that if the amount of income households have to spend increases, the quantity demanded of the good will also increase.

Explanation / Answer

A. The good and the service must be substitutes because there is direct relationship between price and demand of substitutes.

C. When the market price of the service increases, the qunatity offered for sale of the consumer good will increase because when there is increase in demand, equilibrium quantity will aoso increase.

D. Other things being equal, it means that if the amount of ncome households have to spend increases, the quantty demanded of the good will also increase but it will happen if the good concerned is normal good.

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