Considering the concept of cross-price elasticity,when two goods are complements:
A)an increase in the price of one will cause a decrease in the quantity demanded of the other.
B)an increase in the price of one will cause an increase in the quantity demanded of the other.
C)a decrease in the price of one will cause a decrease in the quantity demanded of the other.
D)None of these is true.

Question

Quizplus · Accepted Answer

When two goods are complements, an increase in the price of one will cause a decrease in the quantity of demanded of the other. This is because the goods are consumed together, as in the case of gasoline and cars. An increase in gasoline prices will lead to a decrease in the quantity demanded of cars because the two goods are complements.

Considering the Concept of Cross-Price Elasticity,when Two Goods Are Complements