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

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Explore Elasticities of Demand and Supply Test. Enhance understanding with multiple-choice questions and detailed explanations. Start your journey to mastering economic principles!

Multiple Choice

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

Explanation:
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.

More Multiple Choice Questions
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy