If the price of ice cream increases substantially (ceteris paribus), the equilibrium quantity of hot fudge sauce, a complement, is likely to:
A)increase, and the equilibrium price of hot fudge is likely to decrease.
B)increase, and the equilibrium price of hot fudge is likely to increase.
C)decrease, and the equilibrium price of hot fudge is likely to decrease.
D)decrease, and the equilibrium price of hot fudge is likely to increase.

Question

If the price of ice cream increases substantially (ceteris paribus), the equilibrium quantity of hot fudge sauce, a complement, is likely to:
A)​increase, and the equilibrium price of hot fudge is likely to decrease.
B)​increase, and the equilibrium price of hot fudge is likely to increase.
C)​decrease, and the equilibrium price of hot fudge is likely to decrease.
D)​decrease, and the equilibrium price of hot fudge is likely to increase.

Quizplus · Accepted Answer

When the price of ice cream increases, consumers may decrease their demand for ice cream, which will decrease the demand for hot fudge sauce as well, since they are complements. This decrease in demand for hot fudge sauce will lead to a decrease in both the equilibrium quantity and price of hot fudge sauce. Therefore, option C is the most appropriate choice.

If the Price of Ice Cream Increases Substantially (Ceteris Paribus)