Electric guitars and amplifiers are complement goods, and electric guitars and acoustic guitars are substitute goods. An increase in the price of amplifiers _____ the number of electric guitars consumers want to buy, while an increase in the price of acoustic guitars _____ the number of electric guitars consumers want to buy.

Question

Quizplus · Accepted Answer

When the price of amplifiers increases, fewer people will buy them, which in turn reduces the demand for electric guitars since they are complement goods. Conversely, if the price of acoustic guitars increases, some consumers may switch to electric guitars, thus increasing their demand, as they are substitute goods.

Electric Guitars and Amplifiers Are Complement Goods, and Electric Guitars