Consider the competitive markets for running shoes and gym memberships, two complementary products.Assume that the laws of demand supply hold in each market.You observe the following facts in the two markets: in the running shoe market both the price and quantity traded fall; and in the gym membership market the price increases and the quantity traded falls.What change could explain these changes?
A)The cost of rubber, an input into running shoes, increases.
B)The cost of rubber, an input into running shoes, falls.
C)New computer and security technology allows gyms to operate with fewer staff.
D)New medical research shows that people that exercise regularly live longer and are happier.
E)A new workplace safety law requires that all gyms need to have more and better trained staff.

Question

Quizplus · Accepted Answer

The new workplace safety law increases the cost of operating gyms, leading to a decrease in supply, which raises prices and reduces quantity. This decrease in gym memberships reduces demand for complementary running shoes, causing both price and quantity to fall in that market.

Consider the Competitive Markets for Running Shoes and Gym Memberships