Answer to Question #75373 in Microeconomics for bryan

Question

In the market for air travel, which of the following variables would decrease demand, ceteris paribus?
a) An increase in rental rates for hired cars, a substitute.
b) A rise in income of tourists.
c) A rise in the price of air travel.
d) A rise in the price of hotel accommodation, a complement.

Answer 1

d)
Complement goods have negative cross elasticity of demand. That is why the demand for a good decreases when the price of a complement good increases.