Consider the following statements: Other things remaining unchanged, market demand for a good might increase if price of its substitute increases price of its complement increases the good is an inferior good and income of the consumers increases its price falls Which of the above statements are correct?

- 1. Price of its substitute increases: If the price of a substitute good (e.g., tea vs. coffee) increases, consumers will switch from the substitute to the original good (coffee), increasing the demand for the original good at every price. This causes a rightward shift in the demand curve. Statement 1 is correct. - 2. Price of its complement increases: If the price of a complementary good (e.g., cars vs. petrol) increases, the total cost of consuming the bundle increases. This typically leads to a decrease in demand for both the complement and the original good (cars). This causes a leftward shift in the demand curve. Statement 2 is incorrect. - 3. The good is an inferior good and income of the consumers increases: For an inferior good (e.g., cheap noodles), as consumer income increases, demand for that good decreases (consumers switch to normal goods). This causes a leftward shift in the demand curve. Statement 3 is incorrect. - 4. Its price falls: According to the law of demand, if the price of a good falls, the quantity demanded increases. While this is technically a movement along the demand curve (not a shift of the curve which is typically meant by "increase in market demand"), in the context of competitive multiple-choice questions, "market demand... increase" is sometimes used more broadly to include factors that lead to more of the good being bought, which includes a price reduction. Given the options, this interpretation is likely intended. Statement 4 leads to an increase in the quantity demanded.