Sia
Question
Macroeconomics
Posted 8 months ago
Meeps and Blops are two goods that are related to each other. When the price of Meeps goes down, the demand for Blops goes down.
Based only on the information given here, what kind of goods are Meeps and Blops?
Choose 1 answer:
(A) substitutes
(B) superior goods
(C) normal goods
D) inferior goods
(E) complements
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Answer from Sia
Posted 8 months ago
Solution
a
Definition of Complements: Complements are goods that are typically consumed together. When the price of one good decreases, the demand for its complement usually increases
b
Given Information: The problem states that when the price of Meeps goes down, the demand for Blops also goes down
c
Analysis: This relationship indicates that Meeps and Blops are not complements because, for complements, a decrease in the price of one good should increase the demand for the other
d
Conclusion: Since the demand for Blops decreases when the price of Meeps decreases, Meeps and Blops are substitutes. Substitutes are goods that can replace each other; when the price of one decreases, the demand for the other decreases as well
Answer
(A) substitutes
Key Concept
Substitutes are goods that can replace each other in consumption.
Explanation
When the price of one substitute good decreases, consumers will buy more of it and less of the other substitute good, leading to a decrease in demand for the latter.
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