People enjoy water skiing and surfing equally well in the macro islands. if the price of water skis increased drastically, how would the ski rope market be affected? demand / supply / price / quantitya) increase / decrease / decrease / increase b) increase / no change / increase / increase c) no change / decrease / decrease / decrease d) decrease / no change / decrease / decrease e) decrease / increase / increase / decrease

d) Decrease / No Change / Decrease / Decrease

Explanation:

We assume that ski and ski ropes are complementary goods and thus with an increase in price of one will affect the market for the other.

We also know that the cross elasticity of demand is negative for complements.

So an increase in the price of water skis, the rope market will have the following effect.

Demand will fall as the demand for waster ski will also fall given a rise in price.

Supply will be unchanged as there is no variable that affects supply directly.

Price will fall since the quantity demanded for ropes and water skis will have fallen.

Quantity supplied and demanded in the market will fall as a new lower equilibrium is set.

Hope that helps.

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