Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Substitutes lead to increased demand for a product when its price rises, while complements decrease when their price rises.
B
Complements lead to increased sales of a product when its price decreases, while substitutes do not affect sales.
C
Substitutes allow consumers to switch products based on price changes, affecting overall market demand and pricing strategies.
D
Complements are irrelevant to pricing strategies as they do not affect consumer choice.
Understanding the Answer
Let's break down why this is correct
Answer
Substitutes and complements are two important concepts in economics that help explain how consumers make choices and how prices are set in a competitive market. Substitutes are products that can replace each other, like butter and margarine; if the price of butter goes up, people might buy more margarine instead. On the other hand, complements are products that are used together, like cars and gasoline; if the price of gas rises, people may drive less and buy fewer cars. These relationships influence consumer behavior because they affect how much of each product people want to buy based on price changes. For example, if the price of coffee increases, coffee drinkers might switch to tea, leading to a decrease in coffee sales and a potential price drop, while tea sales might rise.
Detailed Explanation
Substitutes are products that can replace each other. Other options are incorrect because This answer mixes up how substitutes and complements work; This answer suggests that substitutes don't affect sales, which is not true.
Key Concepts
consumer behavior
pricing strategy
market analysis.
Topic
Substitutes and Complements in Economics
Difficulty
hard level question
Cognitive Level
understand
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