UPSC Prelims 2021 · GS Paper I
Question 4: Economy and Social Development
Consider the following statements : Other things remaining unchanged, market demand for a good might increase if
- 1.price of its substitute increases
- 2.price of its complement increases
- 3.the good is an inferior good and income of the consumers increases
- 4.its price falls
Which of the above statements are correct?
AnswerUPSC’s answer is (a).
Demand for a good rises when a substitute becomes dearer, because buyers switch towards it, and a fall in its own price raises the quantity demanded. Demand falls when a complement becomes dearer, since the two are used together, so the combined cost rises. For an inferior good, higher income makes buyers move to better goods, so its demand falls. Remember: substitutes move demand the same way, complements the opposite way, and inferior goods move opposite to income.
- 1. A dearer substitute pushes buyers towards this good.
- 2. A dearer complement raises the cost of using the pair together, so demand falls.
- 3. For an inferior good, rising income shifts buyers to better goods and demand falls.
- 4. A lower price raises the quantity demanded along the demand curve, which UPSC counts as an increase.
How you could have got this
- If you were sure statement 3 is not correct, (b), (c) and (d) go: each of them includes 3.
What you needed to know: For an inferior good, rising income shifts buyers to better goods and demand falls.
Only (a) is left. You didn’t need statements 1, 2 or 4.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Right: a dearer substitute and a lower own price both raise demand.
- (b) Wrong: a dearer complement and rising income for an inferior good both reduce demand.
- (c) Wrong: statement 3 is false because inferior goods lose demand as income rises.
- (d) Wrong: statements 2 and 3 are false, and it omits statement 4.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2021, General Studies Paper I, Series A. The paper on upsc.gov.in.