Question

The figure given below shows the relation between the quantity demanded for the good X and the price of the good Z. What type of goods are X and Z?

Options

• Unrelated goods

• Substitute goods

• Complementary goods

• Giffen goods

Answer 1

Complementary goods

Explanation:

The price of an item Z and the demand for its complement good X have an inverse relationship. When the price of good Z rises, it reduces not only the demand for good Z, but also the desire for good X. The graph depicts the indirect relationship between the price of Good Z and the demand for Good X. As a result, they are complimentary items.