📚 Learning Guide
Inferior and Complementary Goods
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How would an increase in the price of peanut butter likely affect the demand for jelly, assuming they are complementary goods?

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Choose the Best Answer

A

Demand for jelly would decrease due to higher peanut butter prices

B

Demand for jelly would increase as consumers buy more peanut butter

C

Demand for jelly would remain unchanged regardless of peanut butter prices

D

Demand for jelly would decrease as consumers switch to substitute spreads

Understanding the Answer

Let's break down why this is correct

Answer

When the price of peanut butter goes up, people might buy less peanut butter because it costs more. Since peanut butter and jelly are complementary goods, which means they are often used together, this decrease in peanut butter purchases can lead to a decrease in jelly purchases as well. For example, if someone usually makes a peanut butter and jelly sandwich for lunch, they might decide not to buy jelly if they can't afford peanut butter anymore. Therefore, as peanut butter becomes more expensive, the demand for jelly is likely to go down too. This shows how the prices of complementary goods can directly affect each other.

Detailed Explanation

When peanut butter costs more, people might buy less of it. Other options are incorrect because This answer suggests that higher peanut butter prices would make people buy more jelly; This choice says jelly demand stays the same, no matter what.

Key Concepts

Complementary Goods
Consumer Behavior
Inferior Goods
Topic

Inferior and Complementary Goods

Difficulty

medium level question

Cognitive Level

understand

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