{"id":86610,"date":"2025-06-01T03:52:21","date_gmt":"2025-06-01T03:52:21","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=86610"},"modified":"2025-06-01T03:52:21","modified_gmt":"2025-06-01T03:52:21","slug":"suppose-there-are-only-two-normal-goods-in-the-economy-x-and-y-if-pr","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/suppose-there-are-only-two-normal-goods-in-the-economy-x-and-y-if-pr\/","title":{"rendered":"Suppose there are only two normal goods in the economy, X and Y. If pr"},"content":{"rendered":"

Suppose there are only two normal goods in the economy, X and Y. If price of good X increases, which would be the correct statement from below ?<\/p>\n

[amp_mcq option1=”Demand for good X decreases and demand for Y is indeterminate.” option2=”Demand for good X decreases and demand for Y decreases.” option3=”Demand for good X increases and demand for Y is indeterminate.” option4=”Demand for good X increases and demand for Y decreases.” correct=”option1″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC CDS-2 – 2024<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nThe correct option is A. The question describes a scenario with two normal goods (X and Y) and asks about the effect of an increase in the price of good X.
\n<\/section>\n
\nIf the price of good X increases, according to the Law of Demand, the quantity demanded of good X will decrease, assuming all other factors remain constant (ceteris paribus). This is a movement along the demand curve for X.
\nTo determine the effect on the demand for good Y, we need to consider the cross-price elasticity of demand, which depends on whether X and Y are substitutes, complements, or unrelated goods.
\n– If X and Y are substitutes (e.g., tea and coffee), an increase in the price of X makes Y relatively cheaper or more attractive. This leads to an increase in the demand for Y (a rightward shift of the demand curve for Y).
\n– If X and Y are complements (e.g., cars and petrol), an increase in the price of X reduces the quantity demanded of X. Since X and Y are consumed together, the reduced consumption of X also leads to a decrease in the demand for Y (a leftward shift of the demand curve for Y).
\n– If X and Y are unrelated goods, a change in the price of X has no significant impact on the demand for Y.
\nThe information that X and Y are “normal goods” relates to how their demand changes with income, not how their demand changes with respect to the price of *another* good. Therefore, based only on the information that X and Y are normal goods and the price of X increased, we know the demand for X decreases, but the effect on the demand for Y is indeterminate without knowing the relationship between X and Y (substitutes, complements, or unrelated).
\n<\/section>\n
\nOption A correctly states that demand for X decreases and demand for Y is indeterminate. Options B, C, and D make specific claims about the demand for Y (decreases, increases) or demand for X (increases), which are either incorrect or not universally true given only the information provided.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Suppose there are only two normal goods in the economy, X and Y. If price of good X increases, which would be the correct statement from below ? [amp_mcq option1=”Demand for good X decreases and demand for Y is indeterminate.” option2=”Demand for good X decreases and demand for Y decreases.” option3=”Demand for good X increases … <\/p>\n

Detailed SolutionSuppose there are only two normal goods in the economy, X and Y. If pr<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1088],"tags":[1103,1120,1174],"class_list":["post-86610","post","type-post","status-publish","format-standard","hentry","category-upsc-cds-2","tag-1103","tag-economic-development","tag-national-income-gross-domestic-product","no-featured-image-padding"],"yoast_head":"\nSuppose there are only two normal goods in the economy, X and Y. If pr<\/title>\n<meta name=\"description\" content=\"The correct option is A. The question describes a scenario with two normal goods (X and Y) and asks about the effect of an increase in the price of good X. If the price of good X increases, according to the Law of Demand, the quantity demanded of good X will decrease, assuming all other factors remain constant (ceteris paribus). This is a movement along the demand curve for X. To determine the effect on the demand for good Y, we need to consider the cross-price elasticity of demand, which depends on whether X and Y are substitutes, complements, or unrelated goods. - If X and Y are substitutes (e.g., tea and coffee), an increase in the price of X makes Y relatively cheaper or more attractive. This leads to an increase in the demand for Y (a rightward shift of the demand curve for Y). - If X and Y are complements (e.g., cars and petrol), an increase in the price of X reduces the quantity demanded of X. Since X and Y are consumed together, the reduced consumption of X also leads to a decrease in the demand for Y (a leftward shift of the demand curve for Y). - If X and Y are unrelated goods, a change in the price of X has no significant impact on the demand for Y. The information that X and Y are "normal goods" relates to how their demand changes with income, not how their demand changes with respect to the price of *another* good. Therefore, based only on the information that X and Y are normal goods and the price of X increased, we know the demand for X decreases, but the effect on the demand for Y is indeterminate without knowing the relationship between X and Y (substitutes, complements, or unrelated).\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/suppose-there-are-only-two-normal-goods-in-the-economy-x-and-y-if-pr\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Suppose there are only two normal goods in the economy, X and Y. If pr\" \/>\n<meta property=\"og:description\" content=\"The correct option is A. The question describes a scenario with two normal goods (X and Y) and asks about the effect of an increase in the price of good X. If the price of good X increases, according to the Law of Demand, the quantity demanded of good X will decrease, assuming all other factors remain constant (ceteris paribus). This is a movement along the demand curve for X. To determine the effect on the demand for good Y, we need to consider the cross-price elasticity of demand, which depends on whether X and Y are substitutes, complements, or unrelated goods. - If X and Y are substitutes (e.g., tea and coffee), an increase in the price of X makes Y relatively cheaper or more attractive. This leads to an increase in the demand for Y (a rightward shift of the demand curve for Y). - If X and Y are complements (e.g., cars and petrol), an increase in the price of X reduces the quantity demanded of X. Since X and Y are consumed together, the reduced consumption of X also leads to a decrease in the demand for Y (a leftward shift of the demand curve for Y). - If X and Y are unrelated goods, a change in the price of X has no significant impact on the demand for Y. The information that X and Y are "normal goods" relates to how their demand changes with income, not how their demand changes with respect to the price of *another* good. Therefore, based only on the information that X and Y are normal goods and the price of X increased, we know the demand for X decreases, but the effect on the demand for Y is indeterminate without knowing the relationship between X and Y (substitutes, complements, or unrelated).\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/suppose-there-are-only-two-normal-goods-in-the-economy-x-and-y-if-pr\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T03:52:21+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Suppose there are only two normal goods in the economy, X and Y. 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Since X and Y are consumed together, the reduced consumption of X also leads to a decrease in the demand for Y (a leftward shift of the demand curve for Y). - If X and Y are unrelated goods, a change in the price of X has no significant impact on the demand for Y. The information that X and Y are \"normal goods\" relates to how their demand changes with income, not how their demand changes with respect to the price of *another* good. Therefore, based only on the information that X and Y are normal goods and the price of X increased, we know the demand for X decreases, but the effect on the demand for Y is indeterminate without knowing the relationship between X and Y (substitutes, complements, or unrelated).","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/suppose-there-are-only-two-normal-goods-in-the-economy-x-and-y-if-pr\/","og_locale":"en_US","og_type":"article","og_title":"Suppose there are only two normal goods in the economy, X and Y. If pr","og_description":"The correct option is A. The question describes a scenario with two normal goods (X and Y) and asks about the effect of an increase in the price of good X. 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Since X and Y are consumed together, the reduced consumption of X also leads to a decrease in the demand for Y (a leftward shift of the demand curve for Y). - If X and Y are unrelated goods, a change in the price of X has no significant impact on the demand for Y. The information that X and Y are \"normal goods\" relates to how their demand changes with income, not how their demand changes with respect to the price of *another* good. 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This leads to an increase in the demand for Y (a rightward shift of the demand curve for Y). - If X and Y are complements (e.g., cars and petrol), an increase in the price of X reduces the quantity demanded of X. Since X and Y are consumed together, the reduced consumption of X also leads to a decrease in the demand for Y (a leftward shift of the demand curve for Y). - If X and Y are unrelated goods, a change in the price of X has no significant impact on the demand for Y. The information that X and Y are \"normal goods\" relates to how their demand changes with income, not how their demand changes with respect to the price of *another* good. 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