Question

If pencils and paper are complements for most consumers, then if the price of paper increases, you would expect:

Multiple Choice

• the equilibrium price and quantity of pencils to rise.

• the equilibrium price of pencils to fall and the equilibrium quantity of pencils to rise.

• the equilibrium price and quantity of pencils to fall.

• the equilibrium price of pencils to rise and the equilibrium quantity of pencils to fall.

Answer 1

option 3

The equilibrium price and quantity of pencils to fall.

Complement goods are consumed together means the price of one and the quantity of others has a negative relationship as the decrease in the price of one increases consumption of both and increase in price decreases consumption of both.

the increase in the price of paper decreases the demand for pencils and shifts the demand curve to the left which decreases both price and quantity of pencils