A decrease in the price of product B leads to no change in the demand of product C. This indicates that products B and C are
The correct answer and explanation is:
The correct answer is that products B and C are unrelated goods.
Explanation:
When the price of product B decreases and there is no change in the demand for product C, it shows that the two products do not affect each other’s demand. This lack of influence means the products are unrelated.
In economics, the relationship between two products can be classified mainly into three categories: substitutes, complements, or unrelated goods.
Substitute goods are products that can replace each other. For example, butter and margarine. If the price of margarine falls, consumers may buy more margarine and less butter, leading to a decrease in demand for butter. Thus, a price change in one substitute good affects the demand of the other inversely.
Complementary goods are products used together. For example, printers and ink cartridges. If the price of printers drops, more printers are sold, increasing the demand for ink cartridges as well. In this case, a price change in one good directly affects the demand for its complement.
Unrelated goods have no direct connection in consumption. A price change in one product does not influence the demand for the other. For example, if the price of apples decreases, it might have no effect on the demand for cars because these goods serve very different purposes and do not affect each other’s consumption.
In this scenario, since the demand for product C remains unchanged despite the price decrease in product B, it indicates the two products do not substitute for each other, nor are they consumed together. Therefore, the products are unrelated goods.
Understanding this classification helps businesses and economists predict how changes in prices of certain goods will impact the market demand of other goods. This knowledge assists in pricing strategies, marketing, and supply chain decisions.