If a decrease in the price of Good B leads to an increase in the demand for Good A, A and B are

• A. Substitutes
• B. Normal
• C. Inferior
• D. Complements

Answer: (D)

The key idea is cross-price effects: how the quantity demanded of one good responds to the price of another. If lowering the price of Good B causes the quantity of Good A demanded to rise, the two goods are consumed together often enough that cheaper B makes buying A more attractive as well. This gives a negative cross-price elasticity of demand, which characterizes complements.

So, these two goods being complements means they’re typically used together, like printer and ink or bread and butter; a cheaper price for one boosts demand for the other. Substitutes would move in the opposite direction—when the price of one falls, people switch away from the other—so they wouldn’t show this positive spillover. Normal and inferior describe how demand shifts with income, not with the price of a different good.