If a fall in the price of good A increases the quantity demanded of good B, A and B are

If a fall in the price of good A increases the quantity demanded of good B, A and B are

• A. A and B are substitutes.
• B. A and B are complements.
• C. B is a substitute for A, but A is a complement to B.
• D. A is a substitute for B, but B is a complement to A.

Answer: (B)

When a fall in the price of one good leads to a higher quantity demanded of another, those two goods are complements. The cheaper price makes using both together more attractive, so consumers buy more of the other good as well. This reflects a negative cross-price elasticity of demand: as price of A falls, demand for B rises. Think of items you often use together, like printers and ink or coffee and cream. The other options would imply that lowering the price of one would reduce or not change the demand for the other, which isn’t the pattern described here.

When a fall in the price of one good leads to a higher quantity demanded of another, those two goods are complements. The cheaper price makes using both together more attractive, so consumers buy more of the other good as well. This reflects a negative cross-price elasticity of demand: as price of A falls, demand for B rises. Think of items you often use together, like printers and ink or coffee and cream. The other options would imply that lowering the price of one would reduce or not change the demand for the other, which isn’t the pattern described here.