An increase in the price of socks is likely to decrease the demand for shoes and a decrease in the price of socks is likely to increase the demand for shoes. Socks and shoes are:
An increase in the price of socks is likely to decrease the demand for shoes and a decrease in the price of socks is likely to increase the demand for shoes. Socks and shoes are:
Solution
Option 1 -> Giffen goods describe a single good's unusual demand behavior, not a relationship between two goods.
Option 2 -> Substitute goods have an inverse relationship - when one's price increases, demand for the other increases (like tea and coffee).
Option 3 -> Complementary goods are consumed together - when one's price increases, demand for the other decreases, matching the scenario.
Option 4 -> Inferior goods relate to income changes, not the relationship between two products.
Hence, Option 3: Complementary goods -> Socks and shoes are complementary goods because they are typically used together. When socks become more expensive, people buy fewer socks AND fewer shoes since they're worn as a pair. Conversely, when socks become cheaper, people buy more of both. This positive relationship in quantities demanded (both move in the same direction) despite the price change in only one good is the defining characteristic of complementary goods. Other examples include cars and fuel, smartphones and apps, or coffee and sugar. -> correct
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