If an increase in the price of peanut butter causes a decline in the demand for jelly, then
A)the goods are substitutes
B)jelly is an inferior good
C)the goods are complements
D)both goods are inelastic
E)peanut butter is an inferior good

Question

Quizplus · Accepted Answer

When goods are complements, an increase in the price of one leads to a decrease in demand for the other. In this case, peanut butter and jelly are often consumed together, making them complements. Therefore, an increase in the price of peanut butter would lead to a decline in the demand for jelly.

If an Increase in the Price of Peanut Butter Causes