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 is likely to decrease.
B) increase, and the equilibrium price is likely to increase.
C) decrease, and the equilibrium price is likely to decrease.
D) decrease, and the equilibrium price is likely to increase.

Question

Quizplus · Accepted Answer

If the price of ice cream increases substantially, it will lead to a decrease in the demand for ice cream. As hot fudge sauce is a complement to ice cream, the decrease in the demand for ice cream will lead to a decrease in the demand for hot fudge sauce as well. Thus, the equilibrium quantity of hot fudge sauce is likely to decrease. As for its equilibrium price, it is likely to decrease as well due to the decrease in demand.

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