Donuts and Coffee Are Complements

question 91

Multiple Choice

Donuts and coffee are complements. When the price of a donut increases, the demand for coffee ________ and the cross elasticity of demand for coffee with respect to the price of a donut is ________.

• A) decreases; negative
• B) increases; negative
• C) increases; positive
• D) decreases; positive

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Definitions:

Persuasive Regulation

Regulations or guidelines that aim to influence behavior or decisions without imposing mandatory legal obligations.

General Welfare

Refers to the common well-being or general health, happiness, and safety of the public that governments aim to promote and protect.

Congressional Power

The legal authority granted to the Congress of the United States, under the constitution, to make laws, declare war, levy taxes, and conduct investigations.

Economic Regulation

The imposition of rules by government, aimed at modifying the economic behavior of individuals, firms, or industries to achieve public policy objectives.