Two goods X and Y are such a combination that, when the price of good Y increases, the demand for good X increases. How are goods X and Y related?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → substitute goods
When the price of one good (Y) increases and, as a result, the demand for another good (X) increases, the two goods are said to be substitutes. This happens because consumers switch from the costlier good to its substitute.
Example: If the price of tea (Y) rises, people may buy more coffee (X) instead. Thus, tea and coffee are substitute goods — goods that can replace each other in consumption.