Question

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

1. Andy’s demand for pizza to increase

2. Andy’s demand for pizza to decrease

3. Andy’s quantity of pizza demanded to decrease

4. Andy’s demand for beer to increase

Answer 1

A complementary good is a good whose use is related to the use of an associated or paired good. Two goods (A and B) are complementary if using more of good A requires the use of more of good B.

Thus, as beer and pizza are complements to one another then, the demand for one good (pizza) generates demand for the other (beer). If the price of one good falls and people buy more of it, they will usually buy more of the complementary good also, whether or not its price also falls. Similarly, if the price of one good rises and reduces its demand, it may reduce the demand for the paired or complementary good as well.

Thus, if the price of pizza decreases, economists would expect :

3. Andy's demand for beer to increase.