ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -d. Since peanut butter and jelly are complements, a fall in the price of peanut butter will lead to an increase in the demand for jelly.

Detailed explanation-2: -The demand for jelly will decrease when the price of peanut butter increases because peanut butter and jelly are complement products.

Detailed explanation-3: -According to the law of demand, price and quantity demand has a negative or inverse relationship, in case of a normal good. If the price of peanut butter increases, people will be discouraged to demand more as it is expensive now and reduce their quantity demanded of peanut butter.

Detailed explanation-4: -Changes in the price of related goods and services Alternatively, if the price of complementary goods increases, the curve will shift inwards. The opposite is true for substitute goods. For example, if the price for peanut butter goes down significantly, the demand for its complementary good – jelly – increases.

Detailed explanation-5: -For example, an increase in the sugar prices, which is an input in jelly production, would decrease the amount of jelly being supplied since firms would find it expensive to produce it.