Two goods are complements when a decrease in the price of one good
a. decreases the quantity demanded of the other good.
b. increases the quantity demanded of the other good.
c. increases the demand for the other good.
d. decreases the demand for the other good.
Increases the demand for the other good
The correct answer is a. decreases the quantity demanded of the other good.
To understand why, let's first define complements. Complements are goods that are typically consumed together or are used together in the consumption process. For example, peanut butter and jelly are complements because they are commonly used together to make sandwiches.
Now, when the price of one complement decreases, it becomes relatively cheaper compared to the other complement. This change in price affects the demand for the other complement.
According to the law of demand, when the price of a good decreases, the quantity demanded of that good increases. However, this law does not directly apply to complements because complements are consumed together. So, as the price of one complement decreases, people are more likely to purchase more of that good. But since complements are typically consumed together, people will also want to consume more of the other complement. Therefore, when the price of one good decreases, the quantity demanded of the other good decreases as well.
In this case, a decrease in the price of one good decreases the quantity demanded of the other good, so the correct answer is a.