📚 Learning Guide
Complementary Goods and Demand
medium

If the price of coffee increases, what is likely to happen to the demand for muffins?

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Learning Path
Learning Path

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Choose the Best Answer

A

Demand for muffins will decrease

B

Demand for muffins will increase

C

Demand for muffins will remain unchanged

D

Demand for muffins will fluctuate randomly

Understanding the Answer

Let's break down why this is correct

Answer

When the price of coffee goes up, many people may buy less coffee because it costs more. Coffee and muffins are complementary goods, which means they are often enjoyed together. If people are drinking less coffee, they will likely also buy fewer muffins since they usually have them together. For example, if someone used to buy a muffin with their coffee every morning but now finds coffee too expensive, they might skip the muffin as well. Overall, the demand for muffins is likely to decrease because of the higher coffee prices.

Detailed Explanation

When coffee costs more, people might buy less coffee. Other options are incorrect because Some might think that if coffee is more expensive, people will buy more muffins to enjoy with it; This choice suggests that the price change won't affect muffin sales.

Key Concepts

Complementary Goods
Demand Relationships
Cross-Price Elasticity
Topic

Complementary Goods and Demand

Difficulty

medium level question

Cognitive Level

understand

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