How do complements affect the consumer surplus of a primary product or service?

• A. An increase in the price of a complement decreases the consumer surplus of the primary product.
• B. A decrease in the price of a complement decreases the consumer surplus of the primary product.
• C. Complements have no effect on the consumer surplus of the primary product.
• D. An increase in the price of a complement increases the consumer surplus of the primary product.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of complements in microeconomics. Complements are goods that are consumed together, such that the consumption of one good increases the value or demand for the other. For example, printers and ink cartridges are complements.
2. Step 2: Recall the definition of consumer surplus. Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. It measures the net benefit to consumers from purchasing a product.
3. Step 3: Analyze how a change in the price of a complement affects the demand for the primary product. If the price of a complement increases, the combined cost of consuming both goods rises, which typically reduces the demand for the primary product.
4. Step 4: Connect the change in demand to consumer surplus. A decrease in demand for the primary product, caused by a higher price of its complement, leads to a lower consumer surplus for the primary product because fewer consumers are willing or able to buy it at previous prices.
5. Step 5: Summarize the relationship: An increase in the price of a complement decreases the consumer surplus of the primary product, while a decrease in the price of a complement increases the consumer surplus of the primary product.