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What are substitute goods?
What are substitute goods?
- Goods that are always identical
- Alternative goods that could be used for the same purpose (correct)
- Goods used together to enhance value
- Goods that are competitive as they can't be replaced
What is a complementary good?
What is a complementary good?
An item used in conjunction with another good or service.
Which of the following pairs are examples of complementary goods?
Which of the following pairs are examples of complementary goods?
- Pepsi Cola and Coca Cola
- Fish and Chips (correct)
- Tea and Coffee
- Hot Dogs and Hot Dog Buns (correct)
Which of the following pairs are examples of substitute goods?
Which of the following pairs are examples of substitute goods?
When the price of one substitute good goes up, the demand for the other substitute also goes up.
When the price of one substitute good goes up, the demand for the other substitute also goes up.
Substitute goods are not competitive as they can be easily replaced by a competitor.
Substitute goods are not competitive as they can be easily replaced by a competitor.
How does a decrease in the price of tortilla chips affect the demand for salsa?
How does a decrease in the price of tortilla chips affect the demand for salsa?
How does an increase in the price of chips affect Superman's demand for salsa?
How does an increase in the price of chips affect Superman's demand for salsa?
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Study Notes
Substitute Goods
- Definition: Two alternative goods that serve the same purpose, providing consumers with choices.
- Example: Strawberries and blueberries; they can be consumed interchangeably.
- Price effect: When the price of one substitute rises, the demand for the other substitute increases.
Complementary Goods
- Definition: Items that are used together, enhancing the value when combined but often lacking in value alone.
- Example: Hot dogs and hot dog buns; each adds value to the other when consumed together.
- Other examples: iPhone and its apps, fish and chips, solar panels with batteries, and shoes with polish.
Demand Response to Pricing
- Decrease in price of tortilla chips leads to increased demand for salsa, showcasing the complementary relationship.
- Increase in price of chips results in decreased demand for salsa, demonstrating how price changes affect related goods.
True or False Statements
- Statement: When the price of one substitute good goes up, the demand for the other substitute also goes up – True.
- Statement: Substitute goods are not competitive as they can be easily replaced by a competitor – False; they are competitive as they serve similar needs.
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