What effect does a decrease in the price of complements have on demand?

• A. It increases demand for the related good
• B. It decreases demand for the related good
• C. It has no effect on demand
• D. It causes a complete shift in supply

Answer: (A)

A decrease in the price of complements leads to an increase in demand for the related good because complementary goods are products that are often consumed together. When the price of one complement decreases, it becomes more affordable for consumers. This encourages them to buy more of that complement. As a result, the demand for the paired good also rises since consumers are likely to purchase both items together.

For example, if the price of printers decreases, the demand for printer ink may increase because consumers are more willing to purchase a printer, knowing that the ongoing cost of ink is lower. Thus, a reduction in the price of one complements increases the attractiveness of the related product and results in higher overall demand.