Question

If bacon and eggs are complementary goods, a rise in the price of eggs will _____________ the demand for bacon. a) increase b) decrease c) not affect d) none of the above

Answer 1

Answer:

If bacon and eggs are complementary goods, a rise in the price of eggs will decrease the demand for bacon.

Answer - B

Explanation:

Complementary goods are those goods which are related and can be consumed together. For example, a phone charge complements a phone. A matchbox or lighter complements a cigarette. Complementary goods tend to have an inverse relationship. When the price of one good increases, the demand for the other decreases.

This can be explained in detail with the provided example.

When people consume bacon and eggs together, a rise in price of eggs means that they will demand less and purchase less of eggs. Without eggs, they may not want to purchase bacon either (assuming they do not want to consume it without eggs). Therefore, the demand for bacon will also decrease.

Hope this helps :)