Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will
A)increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles.
B)increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles.
C)decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles.
D)decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles.

Question

Quizplus · Accepted Answer

When the price of tomatoes decreases, the cost of producing tomato sauce also decreases, leading to a lower price for tomato sauce. This increases consumer surplus in the tomato sauce market as consumers can now buy tomato sauce at a lower price. Since tomato sauce and spaghetti noodles are complementary goods, a decrease in the price of tomato sauce increases the demand for spaghetti noodles, potentially increasing the producer surplus in the spaghetti noodles market due to higher sales volume.

Tomato Sauce and Spaghetti Noodles Are Complementary Goods