Question

A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand for marijuana. Based on this information we can conclude that____________.

Answer 1

Answer:

A beer and marijuana are complementary goods

Explanation:

Based on the relationship described in the given statement it can be suggest that beer and marijuana are complementary goods. This is because of the fact that when the price of one item (beer) is increased due to taxation then this means that its demand might decrease due to higher prices now. But this decrease in beer demand then results in the decrease in demand and consumption of the other (marijuana). This presents a very clear process that the decrease in one leads to decrease in other hence they are complementary goods.