Increase in demand refers to :

Larger quantity demanded due to rise in price of substitute goods

The correct answer is Option 3: Larger quantity demanded due to rise in price of substitute goods

A change in quantity demanded refers to a movement along a fixed demand curve -- that's caused by a change in price. Change in quantity demanded (or movement along the demand curve) is associated with a change in the demand curve by a rise/fall in the price of the commodity. It is expressed in the form of an expansion of demand or contraction in demand. When the demand of a good rises due to a fall in the price of the good alone, it is termed as expansion of demand. When the demand of a good falls due to rise in its price, it is called as contraction in demand.

A change in demand refers to a shift in the demand curve -- that's caused by factors other than the price of the product itself like: income, preferences, changes in the price of related goods and so on. It is expressed in the form of an increase or decrease in demand. When at the given price, the demand of a good increases, it is called increase in demand. When at the given price, the demand decreases, it is called decrease in demand. Graphically, it means, shift of the demand curve. Thus, an increase in demand describes a scenario where consumers may demand more of a particular good due to the increase in the price of its substitutes (which is a factor other than the price of the product itself) which would lead to an increase in demand for the original product.

Note: As per NTA, the answer is Option 3: Larger quantity demanded due to fall in own price of commodity. However, this answer is incorrect as explained above as the question asks about "increase in demand" and not "increase in quantity demanded". In case the question was related to "increase in quantity demanded", the answer would have been option 1.