Explain the difference between substitutes and complements
What will be an ideal response?
Substitutes are goods and services that can be used for the same purpose. Complements are goods and services that are used together.
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What is the result of an agricultural support price established above the equilibrium price?
A) The market gravitates toward and remains in equilibrium. B) There will be excess quantity supplied of the product involved. C) There will be excess quantity demanded the product in this market. D) Since the support price is set above the equilibrium price, it will have no impact on the market price.
What is the primary difference between the substitution and the income effect of a price change?
A) The substitution effect holds income constant and the income effect holds utility constant. B) The substitution effect is always positive and the income effect is always negative. C) The substitution effect holds utility constant and the income effect holds prices constant. D) The substitution effect is always negative and the income effect is always positive.