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Question
The figure given below shows the relation between the quantity demanded for the good X and the price of the good Z. What type of goods are X and Z?
Options
Unrelated goods
Substitute goods
Complementary goods
Giffen goods
Solution
Complementary goods
Explanation:
The price of an item Z and the demand for its complement good X have an inverse relationship. When the price of good Z rises, it reduces not only the demand for good Z, but also the desire for good X. The graph depicts the indirect relationship between the price of Good Z and the demand for Good X. As a result, they are complimentary items.
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