Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Recognize that muffins and coffee are complementary goods
B
Calculate the cross-price elasticity of demand
C
Determine the price increase of muffins
D
Predict the decrease in demand for coffee
Understanding the Answer
Let's break down why this is correct
Answer
To analyze how a price increase in muffins affects the demand for coffee, we start by understanding that muffins and coffee are complementary goods, meaning they are often consumed together. When the price of muffins goes up, fewer people may want to buy them because they are more expensive. As a result, since people usually enjoy coffee with their muffins, the demand for coffee is likely to decrease as well. For example, if a café raises the price of muffins, customers might decide to buy fewer muffins and, consequently, buy less coffee too. This shows how the price change of one good can influence the demand for another good that is closely related.
Detailed Explanation
Muffins and coffee are complementary goods. Other options are incorrect because Calculating cross-price elasticity comes later; You need to understand the relationship first.
Key Concepts
Complementary Goods
Cross-Price Elasticity
Market Behavior
Topic
Complementary Goods and Demand
Difficulty
medium level question
Cognitive Level
understand
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