Association of Chartered Certified Accountants (ACCA) Certification Practice Test

If the price of a complement rises, how does this affect the demand curve of the other complement?

1. The demand curve shifts to the left

2. The demand curve remains unchanged

3. The demand curve shifts to the right

4. The demand curve fluctuates randomly

The correct answer is: The demand curve shifts to the left

When the price of a complementary good rises, it typically leads to a decrease in the quantity demanded for that complementary good. Complements are goods that are often used together; for example, when the price of coffee increases, the demand for cream may decrease because fewer people are buying coffee. Consequently, as the price of one complement rises, it becomes less attractive for consumers to purchase both goods together. This shift in consumer behavior results in a leftward shift of the demand curve for the other complementary good. This is because, at every price level, consumers will now demand less of the complementary good due to the increase in the price of its partner. Therefore, the correct outcome is that the demand curve shifts to the left, indicating a decrease in demand for the good as a direct consequence of the rise in the price of its complement. In contrast, the other options do not accurately reflect this relationship; the demand curve does not remain unchanged, shift to the right, or fluctuate randomly in response to changes in the price of a complement.