The price of “snufooos” increases and the demand for “gridzies” goes down. Therefore, “snufooos” and “gridzies” are considered:...

The price of “snufooos” increases and the demand for “gridzies” goes down. Therefore, “snufooos” and “gridzies” are considered:

		substitute goods
		complementary goods
		inferior goods
		luxury items

Solutions

Expert Solution

Substitutes are those goods which can replace each other

For example tea and coffee

Complements are those good which complete each other

Example can be pen and paper

If we have to find out whether a good is a luxury, inferior ,normal good then we have to study the income elasticity of demand

Income elasticity of demand is studied only for one good

But here in the question there are two goods so we have to find that whether they are complements or substitutes to each other on the basis of cross price elasticity of demand

Since the increase in the price of snufoos causes fall in the demand of gridzes as well

It means both of them are complements to each other

Answer is option b

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The demand for a commodity generally goes down as the price goes up. Assume that the...

The demand for a commodity generally goes down as the price goes up. Assume that the demand for a certain commodity (maybe gasoline) goes up as the price goes up. Is it still possible for there to be an equilibrium price? What would the demand & supply graph look like?

The law of demand says that when the price of something goes down people buy less...

The law of demand says that when the price of something goes down people buy less of it (and vice versa), all other things being equal. Such a change is referred to as an increase in quantity demanded and is shown by a movement down along a given demand curve. By contrast, an increase in demand is shown by a rightward shift in the entire demand curve. 1. Some people seem to believe that there are goods for which the...

For a straight-line downward-sloping demand curve, price elasticity of demand a. increases as we move down...

For a straight-line downward-sloping demand curve, price elasticity of demand a. increases as we move down along the demand curve from higher to lower prices. b. decreases as we move down along the demand curve from higher to lower prices. c. remains constant along the entire demand curve. d. a or b depending on the actual slope of the demand curve

Question: Equilibrium price must decrease if: a. demand increases and supply increases b. demand increases and...

Question: Equilibrium price must decrease if: a. demand increases and supply increases b. demand increases and supply decreases c. demand decreases and supply decreases d. demand decreases and supply increases

28. If as the price of stesk increases, the demand for eggplant increases then steak and...

28. If as the price of stesk increases, the demand for eggplant increases then steak and eggplant are a. Complements b. Substitute c. inferior goods d. Normal goods 29. A quota is a. a tax on imports b. a tax on exports c. a prohibition on International trade d. a limit on the amount of imports 30. the price of cotton had increased. which of the following will occur in the market for cotton shirts? a.the demand will decrease b.the...

If the demand for good A increases when the price of good B increases, then goods...

If the demand for good A increases when the price of good B increases, then goods A and B are A. unrelated goods. B. complements. C. substitutes. D. There is not enough information to make a determination.

As price elasticity of demand increases, the burden of a taxgets _______; as price elasticity...

As price elasticity of demand increases, the burden of a tax gets _______; as price elasticity of supply increases, the burden of a tax gets _________.(Here, you can read "bigger" as "heavier" and "smaller" as "lighter" if that helps.)A. smaller; biggerB. bigger; smallerC. smaller; smallerD. bigger; bigger

Question