Question

If goods A and Z are complements in consumption, an increase in the price of good Z will _____. If goods A and Z are complements in production, an increase in the price of good Z will _____.

A) increase the demand for good A; decrease the supply for good A

B) decrease the demand for good A; increase the supply for good A

C) decrease the demand for good Z; decrease the supply for good A

D) increase the demand for good A; increase the demand for good A

Answer 1

An increase in the price of a complement good will decrease the demand for the other good in consumption and increase the supply for the other good in production.

Step-by-step explanation:

If goods A and Z are complements in consumption, an increase in the price of good Z will decrease the demand for good A. On the other hand, if goods A and Z are complements in production, an increase in the price of good Z will increase the supply for good A.