Why demand of CNG increases as price of petrol increases?
Answer :
The change in quantity demanded of a commodity resulting from a change in its relative price is known as Substitution effect. It reflects the tendency of people to substitute in favour of cheaper commodities and away from more expensive commodities.
As the price of petrol increases with the price of CNG remaining the same, CNG will become relatively cheaper.CNG becomes more attractive to people in comparison with petrol (both satisfy the same type of demand and hence can be used in place of one another).Consumers will normally like to shift from the consumption of petrol to CNG.
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