Explain the effect of change in prices of related goods on demand for the given good.

The effect of change in prices of related goods on demand for the given good are:

Demand for a commodity in relationship to the substitute good's price. When the price of one good drops the price of another good becomes higher than the one. As a result, the other good substitutes the one good like coffee and tea. Assume tea and coffee are two substitute goods.

a) Increase in price of substitute good: When the price of tea less, the quantity demand is higher. While if there is an increase in the price of the substitute good which in this case is coffee, then the demand curve for tea shifts to the right. Greater the purchase of a commodity at its constant price points to a situation of increase or forward shift in the demand curve. The consumer demand curve shifts when consumption of tea is more even when its price is constant.

b) Decrease in price of substitute good: When the price of coffee which is the substitute good is decreases in, the demand curve for tea shifts to the left even with a constant price. Thus, the consumer's demand curve shifts backward from when he is consuming less of tea even when the price of tea is constant.

Demand for a commodity in relation to price of the complementary good.

Complementary goods are purchased together such as ink and ink pens.

a) Increase in price of complementary good: There is a decrease in the demand for one good if there is a rise in price of its complementary good. So the demand curve shifts parallel to the left.

b) Decrease in price of complementary good: There is an increase in the demand for a good when there is a decline in the price of its complementary good. In such cases, demand curve shifts parallel to the right.