Firms tend to lower the price of their goods after acquiring a firm that sells a complementary good because
A)They gain market power
B)There is an increase in the overall demand for their products
C)The bundle has a more elastic demand than individual goods
D)The bundle has a more inelastic demand than individual goods

Question

Quizplus · Accepted Answer

When a firm acquires a complementary good, it can offer both goods as a bundle at a lower price. This leads to an increase in the overall demand for their products, as consumers are more likely to buy the bundle at a lower price. However, the demand for the bundle is more elastic than the demand for individual goods, as consumers have more substitutes for the bundle than for individual goods. Therefore, firms tend to lower the price of their goods after acquiring a complementary good to attract more customers and increase overall demand.

Firms Tend to Lower the Price of Their Goods After