Question

If X and Y are Complementary Goods, then with increase in price of X ______.

Options

• Demand of X will decrease and demand of Y will increase

• Demand of X will increase and demand of Y will decrease

• Demand of X and Y will increase

• Demand of X and Y will decrease

Answer 1

If X and Y are Complementary Goods, then with increase in price of X Demand of X and Y will decrease.

Explanation:

A rise in X’s price reduces its quantity demanded and also reduces demand for its complement Y. Thus demand for both goods decreases, with the distinction that X’s own price change affects its quantity demanded.