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For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated. a. New cars and used cars b. Houses and washing machines c. UGG boots and Kindle e-readers d. iPads and Kindle e-readers

User Roywilliam
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Answer:

a) New cars and used cars (Substitutes)

b) Houses and Washing Machines (Complements)

c) UGG boots and Kindle e-readers (Unrelated)

d) iPads and Kindle e-readers (Substitutes)

Step-by-step explanation:

New cars and used cars are substitutes because a consumer who does not have enough money to buy a new car, can easily buy a used car and one can choose to buy a new car over a used car and yet utility will not be changed.

Houses and washing machines are complements because you need a washing machine in a house to help you wash and you also need a house for you to have a place to keep the washing machine. Hence both can be used simultaneously to achieve utility maximization.

UGG boots and Kindle e-readers are unrelated since they cannot be used at the same time to maximize utility, neither can one be used as a substitute for another.

iPads and Kindle e-readers are considered substitute because you can either choose to use an iPad to read a book or you can use Kindle e-readers to do the same. Hence, a consumer can choose one over the other and still achieve same utility.

User Mistenkt
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