📚 Learning Guide
Shifts in Demand Curve
medium

If the price of coffee decreases, how might this impact the demand for cream, a complementary good?

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Learning Path

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Choose the Best Answer

A

Demand for cream will increase

B

Demand for cream will decrease

C

Demand for cream will remain unchanged

D

Demand for cream will become elastic

Understanding the Answer

Let's break down why this is correct

Answer

When coffee becomes cheaper, more people buy it, so the overall coffee consumption rises. Cream is used together with coffee, so the extra coffee buyers will also want more cream to go with it. Because more coffee is bought, the demand curve for cream shifts to the right, meaning the quantity demanded of cream increases at each price. For example, if the coffee price falls from $3 to $2, a coffee shop might see coffee sales jump from 100 cups to 150 cups, and the shop would likely need to add cream to serve the extra 50 cups. Thus, a price drop in coffee boosts the demand for its complementary good, cream.

Detailed Explanation

When coffee is cheaper, more people buy it. Other options are incorrect because Some think a lower coffee price means people spend less overall, so they buy less cream; It is easy to think that a price change only affects the good itself.

Key Concepts

determinants of demand
complementary goods
Topic

Shifts in Demand Curve

Difficulty

medium level question

Cognitive Level

understand

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