Question

. If the demand for two goods are related such that an increase in the price of A causes a decrease in the demand for B, which of the following describes the relation between the two goods according to Neoclassical theory?
A) The goods are complements
B) The goods are substitutes
C) The goods are normal goods
D) The goods are inferior goods

Answer 1

If the demand for two goods are related such that an increase in the price of A causes a decrease in the demand for B, then the two goods are complements according to Neoclassical theory.

So, the correct answer is A) The goods are complements.