Donuts and coffee are complements. When the price of a donut increases, the demand for coffee ________ and the cross elasticity of demand for coffee with respect to the price of a donut is ________.
A) decreases; negative
B) increases; negative
C) increases; positive
D) decreases; positive

Question

Quizplus · Accepted Answer

Complements are goods that are consumed together. When the price of one good increases, the demand for the other good decreases. The cross elasticity of demand measures the responsiveness of the demand for one good to a change in the price of another good. A negative cross elasticity of demand indicates that the two goods are complements.

Donuts and Coffee Are Complements