When the price of good B rises and the quantity demanded of good A also increases, A and B are

When the price of good B rises and the quantity demanded of good A also increases, A and B are

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

Answer: (D)

When the price of one good rises and the quantity demanded of another good rises in response, the two goods are substitutes. Consumers switch from the more expensive option to the cheaper one, boosting demand for the second good as the first becomes pricier. This positive cross-price effect is the hallmark of substitutes. If they were complements, a higher price for one would reduce the quantity demanded of the other, not increase it. So the described pattern fits substitutes.

When the price of one good rises and the quantity demanded of another good rises in response, the two goods are substitutes. Consumers switch from the more expensive option to the cheaper one, boosting demand for the second good as the first becomes pricier. This positive cross-price effect is the hallmark of substitutes. If they were complements, a higher price for one would reduce the quantity demanded of the other, not increase it. So the described pattern fits substitutes.