Suppose that erasers and pencils are complements. When the price of erasers increases and the supply of pencils remains unchanged, _____.
A) the demand for pencils increases
B) the quantity supplied of erasers decreases
C) the equilibrium quantity of pencils decreases
D) the equilibrium price of pencils increases

Question

Quizplus · Accepted Answer

When erasers (a complement of pencils) become more expensive, people buy fewer erasers, which in turn decreases the demand for pencils. This leads to a decrease in the equilibrium quantity of pencils since fewer pencils are needed to match the reduced demand.

Suppose That Erasers and Pencils Are Complements