Question

Suppose chips and salsa are complements. An increase in the price of salsa will cause: A. An upward movement along the demand curve for salsa. B. A leftward shift of the demand curve for salsa. C. A leftward shift of the demand curve for chips. D. An downward movement along the demand curve for chips.

Answer 1

The correct answer is option A and option C.

Explanation:

Chips and salsa are complementary goods. An increase in the price of salsa will cause its demand to decline. This will cause an upward movement to the left on the demand curve for salsa.

At the same price level, the demand curve for chips will shift to the left because of the increase in the price of salsa. This is because increase in price of salsa will lead to a decline in the demand for chips even though its price remains the same.