45. If X1 = f(P1, P2) and X2 = g(P1, P2), then the two commodities are substitutes if
A. (dX1/dP2) < 0, (dX2/dP1) > 0
B. (dX1/dP2) > 0, (dX2/dP1) > 0
C. (dX1/dP2) > 0, (dX2/dP1) < 0
D. (dX1/dP2) < 0, (dX2/dP1) < 0
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Edited: Jun 28, 2021
GIPE MSc 2021 45
GIPE MSc 2021 45
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Actually this question turned up in MSC paper not MA paper. Anyhow the answer is B.
Two commodities are said to be substitutes/competitive if a small increase in the price of one tends to increase the demand of other.Following this logic, dX1/dP2 >0 and dX2/dP1>0 should be the right answer.
Option A and C represents a situation wherein the commodities are neither complements nor substitutes.
Option D represents a situation wherein commodities are complements