Suppose that a decrease in the price of X results in less of good Y sold. This would mean that X and Y are complementary goods. (true or false give explanation)
Answered by Expert Tutors
| If a decrease in price of good X causes a decrease in quantity demanded (sold) for good Y, it means the two are substitutes. This makes the customers to demand the less expensive good X over good Y. Explanation Complementary goods are consumed together, which means that each product depends on the demand of the other. For example, gasoline and car are complements and a change in demand for cars cause a directly proportional change to gasoline. Whenever the relationship between the change in demand for two goods is positive, the two goods are complements. If the relationship is negative, the two goods are considered substitutes such that when price of good X decreases, more of the good is demanded which leaves less quantity demanded for good Y if it is a substitute. |
