Asked by Kierra Horton on Jul 18, 2024

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If two inputs are complementary and employed in fixed proportions, an increase in the price of one input will

A) decrease the demand for the other input.
B) increase the demand for the other input.
C) increase the quantity demanded for the other input.
D) have no effect on the demand for the other input.

Complementary

Pertains to goods or services that are often used together, where an increase in demand for one leads to an increase in demand for the other.

Fixed Proportions

A production scenario where inputs must be used in constant ratios, lacking flexibility in substitution or adjustment.

Input

Factors including workforce, materials, and financial assets employed in the process of producing goods and services.

  • Explain the impact of complementary and substitute resources on labor and product markets.
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Verified Answer

MM
Maranda MattoxJul 24, 2024
Final Answer :
A
Explanation :
When two inputs are complementary and used in fixed proportions, an increase in the price of one input makes it more costly to produce the good, reducing the production quantity. This, in turn, decreases the demand for the complementary input since both are used together in fixed proportions.