Question 1(B):
Match the following:
Group A
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Group B
|
1. Demand and price
|
a. Substitute goods
|
2. Tea and coffee
|
b. Inverse relation
|
3. Inferior goods
|
c. Joint demand
|
4. Factors of production
|
d. Distribution of income
|
5. Pen and ink
|
e. Composite demand
|
|
f. Giffen goods
|
|
g. Indirect demand
|
ANSWER:
Group A
|
Group B
|
1) Demand and price
|
b) Inverse relation
|
2) Tea and coffee
|
a) Substitute goods
|
3) Inferior goods
|
f) Giffen goods
|
4) Factors of production
|
g) Indirect demand
|
5) Pen and ink
|
c) Joint demand
|
1. Demand and price - Inverse relation
Other things remaining constant, as the price of a good rises (or falls), the quantity demanded of the good falls (or rises). Thus, the price of a good and the quantity demanded of the good share a negative relationship or an inverse relationship.
2. Tea and coffee - Substitute goods
Substitute goods refer to those goods that can be consumed in place of each other. In other words, they can be substituted for each other. For example, tea and coffee are substitute goods. In such cases if price of one of them increases, the consumer substitutes it for other good.
3. Inferior goods - Giffen goods
Giffen goods are the goods that are highly inferior. Such goods share a positive relationship with the price. That is as the price of the good increases the demand increase. This is because such goods have strong income effect.
4. Factors of production - Indirect demand
When goods are demanded not for direct consumption but for use in the production of other goods, the demand for such goods is known as indirect demand. All the factors of production have indirect demand, as they are used in the production of other goods.
5. Pen and ink - Joint demand
Two or more goods are said to have a joint demand when these goods are demanded together to satisfy a single want. Without the other they will not be demanded. Accordingly, pen and ink have a joint demand.
