Question

A news story titled​ "Auto Sales​ Zoom, Helped by Low Prices at the​ Pump" includes a graphic showing increasing car and truck sales in one panel and decreasing gasoline prices in the other panel. Source​: ​"Auto Sales​ Zoom, Helped by Low Prices at the​ Pump," Wall Street Journal​, December​ 3, 2014. The graphic described assumes that autos and gasoline are

A. ​complements, because if the price of gasoline​ decreases, the demand for its​ complements, cars and​ trucks, increase.
B. ​complements, because if the price of gasoline​ increases, the demand for its​ complements, cars and​ trucks, increase.
C. ​substitutes, because if the price of gasoline​ decreases, the demand for its​ substitutes, cars and​ trucks, decrease.
D. ​substitutes, because if the price of gasoline​ decreases, the demand for its​ substitutes, cars and​ trucks, increase.

Answer 1

The correct answer is option A.

Step-by-step explanation:

A decrease in the price of gasoline will increase the demand for automobiles. This is both are complements. Complementary goods have a negative cross-elasticity of demand. So a fall in the price of a good will cause an increase in the demand for its complements.

The graphic described here indicates that automobiles and gasoline are complements.