A 5 percent increase in the price of pizza causes a 5 percent drop in the quantity of both pizza and beer sold. Beer and pizza must be complements.

Question

Quizplus · Accepted Answer

The fact that an increase in the price of pizza causes a decrease in the quantity of both pizza and beer sold suggests that these two goods are complements. This is because the law of demand suggests that an increase in price will typically cause a decrease in quantity demanded (ceteris paribus), but because both goods are experiencing a decrease in quantity demanded, this suggests that they are consumed together or have some kind of complementary relationship.

A 5 Percent Increase in the Price of Pizza Causes