Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Question
Chapter 3, Problem 15CQ
To determine
The difference between substitutes and complement goods.
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Suppose that you discover that, ceteris paribus, when the price of tomatoes increases, the demand for bleu cheese decreases. From this you conclude that:
tomatoes and blue cheese are substitutes.
tomatoes are inferior goods and blue cheese is a normal good.
tomatoes and blue cheese are complements.
the demand curve for tomatoes has shifted to the left.
When there is a change in the price of a related good, demand increases or decreases depending on the relationship between the two goods.
Two economic terms describe these two relationships-substitutes and complements.
An increase in the price of Good A increases demand for Good B when the two goods are substitutes.
An increase in the price of Good A decreases demand for Good B when the two goods are complements.The graph shows the shift in the demand for good B when the price of good A increases depending on whether the two goods are substitutes or complements.
Pick from the bold choices below. pls look at the graph.
In Mexico, NAFTA had the result of lowering the price of used cars.
Consider the effect of the price of used cars on the demand for new cars in Mexico.
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(Increase or decrease). This would cause the new car demand curve in Mexico to (Shift right or shift left). The price of new cars in Mexico would…
Suppose that the price of good A increases, the demand for good B increases. This shows that good A and good B are
substitute goods
complement goods
not related
Chapter 3 Solutions
Macroeconomics: Private and Public Choice
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Similar questions
- Suppose when a person’s income increases, his or her demand for mac and cheese decreases. What is the relationship between mac and cheese and income? Mac and cheese are Substitutes Mac and cheese are a Normal good Mac and cheese are an Inferior good Mac and cheese are unaffected by changes in incomearrow_forwardWhat are the examples of complement and substitute goods, where a change in price of one good would cause a change in demand of the other good? Show Graphically.arrow_forwardWhat term is used to describe goods that can replace each other to some extent, so that a rise in the price of one good leads to a higher quantity consumed of the other good, and vice versa? Complementary goods Normal goods Inferior goods Substitutesarrow_forward
- Good A (an inferior good) and Good B (a normal good) are viewed by consumers to be substitute products. Suppose that the price of Good B falls at the same time that consumer income increases. What is the net effect of these two events on equilibrium in the market for Good A? an increase in equilibrium quantity and an indeterminate effect on price a decrease in both the equilibrium price and quantity an indeterminate effect on quantity but an increase in price an increase in both the equilibrium price and quantityarrow_forwardAs the price of good X rises from $10 to $12, the quantity demanded of good Y rises from 100 units to 114 units. Are X and Y substitutes or complements?arrow_forwardPeanut butter and jam can be either substitutes or it can be compliments. Caitlin likes peanut butter and she likes jam, but you do not know if Caitlin regards these products as substitutes or as compliments. Which of the following is true? A. If the price of peanut butter decreases and the quantity of jam Caitlin demanded increases, then Caitlin regards it as substitutes. B. If the price of jam increases and the quantity of peanut butter Caitlin demanded increases, then Caitlin regards it as compliments. C. If the price of peanut butter increases and the quantity of jam Caitlin demanded increases, then Caitlin regards it as substitutes. D. If the price of jam decreases and the quantity of peanut butter Caitlin demanded decreases, then Caitlin regards it as compliments. E. If the price of peanut butter increases and the quantity of jam Caitlin demanded stays the same, Caitlin regards it as compliments.arrow_forward
- Two goods are substitutes if a decrease in the price of one good. This will lead to: Select one: a. reduces the quantity demanded of the other good b. increases the demand for the other good. c. increases the quantity demanded of the other good d. reduces the demand for the other goodarrow_forwardSuppose that after your income increases, you consume less fast food. This means: Fast food is considered an inferior good. Coke and Pepsi are substitutes. Coke and fried chicken are complements. None of the above.arrow_forwardThe price of cake falls and as a result the demand for ice cream increases. What can we conclude? Cake and ice cream are inferior goods. The marginal value of ice cream is greater than the marginal value of cake. Cake and ice cream are complements. Cake and ice cream are substitutes.arrow_forward
- Good B and Good A are substitutes. If the price of Good A rises, what will happen to the demand curve of Good B?arrow_forwardIf two goods are substitutes, what happens if there is a decrease in the price of one good? Question 20 options: It increases the quantity demanded of the other good. It reduces the quantity demanded of the other good. It increases the demand for the other good. It reduces the demand for the other good.arrow_forwardWill an increase in the price of a complementary good outwardly shift the demand curve?arrow_forward
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