The price of peanut butter falls and as a result the demand for jam increases. What can we conclude?
A) Peanut butter and jam are inferior goods.
B) The marginal value of jam is greater than the marginal value of peanut butter.
C) Peanut butter and jam are complements.
D) Peanut butter and jam are substitutes.

Question

Quizplus · Accepted Answer

When the price of peanut butter falls and the demand for jam increases, it indicates that peanut butter and jam are complements. This means that they are often used together, so a decrease in the price of one leads to an increase in demand for the other.

The Price of Peanut Butter Falls and as a Result