For many consumers, bacon and eggs are complements. Egg producers monitor the price of bacon because the cross-price elasticity of demand between bacon and eggs is _____, meaning a(n) _____ in the price of bacon will _____ the demand for eggs.
A) negative; decrease; decrease
B) positive; decrease; increase
C) negative; decrease; increase
D) positive; increase; increase

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand between complementary goods is negative, which means that an increase in the price of one good (bacon) will decrease the demand for the other good (eggs) and a decrease in the price of one good will increase the demand for the other good. Therefore, if the price of bacon increases, the demand for eggs will decrease, and the egg producers will need to adjust their production accordingly.

For Many Consumers, Bacon and Eggs Are Complements