Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Coffee and pastries are substitutes, so an increase in coffee price leads to a decrease in pastry demand.
B
Coffee and pastries are complements, so an increase in coffee price leads to a decrease in pastry demand.
C
The price of coffee has no effect on the demand for pastries.
D
The increase in coffee price makes Maria indifferent to purchasing pastries.
Understanding the Answer
Let's break down why this is correct
Answer
In this scenario, we can infer that coffee and pastries are likely complementary goods, meaning they are often consumed together. When the price of coffee goes up, Maria buys less coffee, which leads her to buy fewer pastries as well. This shows that the increase in coffee prices has made her reduce her overall spending on both items. For example, if she usually buys a coffee and a pastry for breakfast, the higher coffee price may cause her to skip the pastry to save money. This relationship is important because it demonstrates how the price change of one good can directly affect the demand for another good that is linked to it.
Detailed Explanation
Coffee and pastries are complements. Other options are incorrect because This answer suggests that coffee and pastries can replace each other; This answer implies that coffee prices do not affect pastry sales.
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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