Question

. An increase in the demand for cell phones causes an increase in the demand for headphones. This indicates that cell phones and headphonesare

A. inferior goods
. B. substitute goods.
C. Veblen goods.
D. complementary goods.

Answer 1

The increase in demand for cell phones and headphones demonstrates that they are complementary goods, as they are typically used together. Hence, the correct answer is option (D).

Step-by-step explanation:

An increase in the demand for cell phones causing an increase in demand for headphones indicates that cell phones and headphones are complementary goods. Complementary goods are items that are generally used together, such that the consumption of one enhances the consumption of another.

This is different from substitute goods which are used in place of each other, inferior goods, which are consumed less when income rises, or Veblen goods, which are consumed more as their price increases due to their status symbol.