CA Foundation · Business Economics · Theory of Demand and Supply
When the price of petrol rises, the demand for cars is expected to fall. Which relationship between petrol and cars does this illustrate?
Petrol and cars are complementary goods because they are used together. When the price of petrol rises, running a car becomes costlier, so demand for cars falls and the demand curve shifts left, unlike substitutes where demand would rise.
- ASubstitutes
- BComplementsCorrect
- CIndependent goods
- DGiffen goods
Explanation
Petrol and cars are used together, so they are complementary goods. A rise in the price of one lowers demand for the other, shifting its demand curve leftward. Substitutes would show the opposite, with demand rising.
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