Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They are substitutes
B
They are complements
C
They are unrelated
D
They are inferior goods
Understanding the Answer
Let's break down why this is correct
Answer
When the price of good A decreases and the quantity demanded for good B increases, it suggests that goods A and B are substitutes. This means that when good A becomes cheaper, people might choose to buy more of it instead of good B. However, if the demand for good B also goes up, it indicates that some consumers are likely switching from good A to good B, or they are buying both because they see good B as a better value. For example, if the price of coffee (good A) drops, and more people start buying tea (good B), it shows that tea is considered a substitute for coffee. This relationship helps businesses understand how changes in pricing can affect demand for their products.
Detailed Explanation
When the price of good A goes down, people buy more of good B. Other options are incorrect because Some might think these goods are substitutes, which means they replace each other; Thinking these goods are unrelated is a mistake.
Key Concepts
Cross Price Elasticity of Demand
Substitutes and Complements
Consumer Behavior
Topic
Cross Price Elasticity of Demand
Difficulty
medium level question
Cognitive Level
understand
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