Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
An increase in price of a product decreases demand for its complementary goods.
B
An increase in price of a product increases demand for its complementary goods.
C
Price elasticity has no effect on complementary goods.
D
Decreased prices of complementary goods increase demand for the main product.
Understanding the Answer
Let's break down why this is correct
Answer
The price elasticity of demand measures how sensitive the quantity demanded of a product is to changes in its price. When the price of a product decreases and it has elastic demand, more people will buy it, which can lead to increased demand for complementary goods that are used together with it. For example, if the price of printers drops significantly, more people might buy printers, which will likely increase the demand for ink cartridges, as they are needed for the printers to work. This relationship happens because consumers see the two products as connected; when one becomes more affordable, they are more likely to purchase both. Therefore, understanding price elasticity helps businesses predict how changes in price can impact not just their product, but also related goods.
Detailed Explanation
When the price of a product goes up, people buy less of it. Other options are incorrect because This answer suggests that higher prices lead to more demand for related items; This answer implies that price changes don't affect complementary goods.
Key Concepts
price elasticity
Topic
Complementary Goods and Demand
Difficulty
easy level question
Cognitive Level
understand
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