In the article on SUV sales titled "SUV Sales Drop with Gasoline Price Rise" suggests that
A) SUV sales are very responsive to gasoline, which is a substitute good to SUVs.
B) SUV sales did not respond all that much to a rise in gasoline prices, indicating that demand is inelastic for SUVs.
C) Gasoline and SUVs are complementary goods, and when the price of gasoline rose, the demand for SUVs fell.
D) The sign on the cross-price elasticity formula will be positive for SUVs and gasoline.

Question

Quizplus · Accepted Answer

Gasoline and SUVs are complementary goods because the use of one (SUVs) increases the consumption of the other (gasoline). When the price of gasoline rises, it makes operating an SUV more expensive, leading to a decrease in demand for SUVs. This relationship indicates that they are complements, not substitutes.

In the Article on SUV Sales Titled "SUV Sales Drop