The correct answer is (3) Larger quantity demanded due to rise in price of substitute goods.

Explanation:

Increase in demand refers to a rightward shift of the demand curve, meaning consumers are willing to buy more of a good at the same price due to factors other than the good’s own price. Here’s why:

Option (1) describes a movement along the demand curve (due to a fall in the commodity’s own price), not a shift. This reflects the law of demand, not an increase in demand.

Option (2) involves a fall in the price of substitute goods. If substitutes become cheaper, demand for the original good decreases (e.g., cheaper tea reduces demand for coffee). This shifts the demand curve leftward.

Option (3) correctly identifies a rise in the price of substitute goods. When substitutes become more expensive, consumers switch to the original good, increasing its demand (e.g., pricier tea increases demand for coffee). This shifts the demand curve rightward.

Option (4) contradicts the law of demand, as a rise in the good’s own price would reduce quantity demanded (movement upward along the curve).