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Chips and salsa are complements. What will happen if the price of chips goes up?

a) Demand for chips and salsa will increase
b) Demand for chips and salsa will decrease
c) Demand for chips will increase, and salsa will decrease
d) Demand for chips will decrease, and salsa will increase

User Chughts
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1 Answer

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Final answer:

An increase in the price of chips, which are complements to salsa, typically causes a decrease in demand for both products due to their interconnected usage. Meanwhile, expectations of future pricing changes can also affect current demand levels.

Step-by-step explanation:

When chips and salsa are complements, an increase in the price of chips will likely lead to a decrease in demand for both chips and salsa. The reason for this is that when the price of a complement rises, people will generally buy less of that good and, consequently, also less of the goods that are used in conjunction with it. This can be compared to other market situations, for instance, if the price of a substitute good increases, demand for the related good increases, because consumers will switch to the more cost-effective option. Conversely, if a complement's price decreases, demand for the related product will usually increase, as the combined cost of both items is more attractive.

Changes in expectations about future prices can also affect current demand. If consumers anticipate that the price of chips will go up in the future, they might buy more now, but if they expect a price to fall soon, current demand may decrease.

User Patrine
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