Question

A recent study found that an increase in the federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that:

A. beer and marijuana are substitute goods.
B. beer and marijuana are complementary goods.
C. beer is an inferior good.
D. marijuana is an inferior good.

Answer 1

The study found that an increase in the federal tax on beer led to a decrease in the demand for marijuana, indicating that beer and marijuana are substitute goods.

Step-by-step explanation:

The study found that an increase in the federal tax on beer led to a decrease in the demand for marijuana. This indicates that beer and marijuana are substitute goods. When the price of beer increased, people chose to consume less beer and substituted it with marijuana.