📚 Learning Guide
Elasticity Formulas and Relationships
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A sudden increase in the price of coffee leads to a notable decrease in the quantity demanded of sugar. How would you classify the relationship between coffee and sugar based on elasticity concepts?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

Substitutes with elastic demand

B

Complements with elastic demand

C

Complements with inelastic demand

D

Substitutes with inelastic demand

Understanding the Answer

Let's break down why this is correct

Answer

When the price of coffee suddenly increases, people tend to buy less coffee. Because coffee and sugar are often used together, this decrease in coffee consumption also leads to a drop in the quantity demanded for sugar. This relationship shows that coffee and sugar are complementary goods, meaning they are usually consumed together. In terms of elasticity, this situation indicates that the demand for sugar is elastic concerning the price change in coffee; when the price of one goes up, the demand for the other goes down significantly. For example, if someone usually enjoys coffee with sugar but decides to cut back on coffee due to its higher price, they will also use less sugar, showing how the two items are connected.

Detailed Explanation

Coffee and sugar are complements. Other options are incorrect because Some might think coffee and sugar are substitutes, but they are not; This option suggests that sugar is not affected much by coffee prices.

Key Concepts

Price Elasticity of Demand
Cross-Price Elasticity
Consumer Behavior
Topic

Elasticity Formulas and Relationships

Difficulty

medium level question

Cognitive Level

understand

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