Question

When an increase in the price of one good decreases the demand for another good, then the goods are called complementary goods.

a) true
b) false

Answer 1

Complementary goods refer to goods that are often used together and enhance consumption of one another.

When the price of one good increases, the demand for the other good decreases.

Step-by-step explanation:

Complementary goods refer to goods that are often used together and the consumption of one good enhances the consumption of the other.

For example, breakfast cereal and milk, or golf balls and golf clubs. When the price of one good increases, the demand for the other good decreases, leading to a negative relationship between their demand.

Hence, the statement is true.