📚 Learning Guide
Inferior and Complementary Goods
hard

Which of the following statements accurately describe the relationship between inferior goods and complementary goods? Select all that apply.

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Choose the Best Answer

A

An increase in the price of a complementary good will typically decrease the demand for an inferior good.

B

When consumer incomes decrease, the demand for inferior goods, such as Jiffy mix, tends to increase.

C

Complementary goods are always inferior goods.

D

The demand for complementary goods can increase when the demand for an inferior good increases.

E

Inferior goods are unaffected by the demand for substitute goods.

Understanding the Answer

Let's break down why this is correct

Answer

Inferior goods are products that people buy less of when their income increases, while complementary goods are items that are often used together, like coffee and cream. The relationship between these two types of goods can vary depending on the situation. For example, if someone usually buys a cheap brand of coffee (an inferior good) due to low income, they might switch to a more expensive brand when they earn more money. However, if they still enjoy having cream with coffee, the cream remains a complementary good regardless of their income level. So, while inferior goods and complementary goods can exist in the same market, their relationship isn't directly linked; one affects purchasing behavior based on income, while the other relates to how products are used together.

Detailed Explanation

None of the statements are correct. Other options are incorrect because This suggests that if a complementary good gets more expensive, people will buy less of an inferior good; This implies that when people earn less money, they will buy more inferior goods.

Key Concepts

Inferior Goods
Complementary Goods
Consumer Behavior
Topic

Inferior and Complementary Goods

Difficulty

hard level question

Cognitive Level

understand

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