Assume the cross price elasticity of demand between peanut butter and grape jelly is negative

a. Does the cross price elasticity coefficient indicate that peanut butter and grape jelly are substitutes or complements? Why?
b. Describe the effect associated with an increase in the price of peanut butter on the the demand for both peanut butter and grape jelly.

a. A negative price elasticity coefficient indicates the two goods are viewed as complements. As such, when the price of peanut butter increases, the demand for jelly decreases and vice versa.
b. An increase in the price of peanut butter would cause a movement up along the existing demand curve for peanut butter, i.e., a decrease in quantity demanded. Because peanut butter and grape jelly are viewed as complements, this would also cause a decrease in the demand for grape jelly, i.e., the demand curve for grape jelly would shift left.