Joint Demand for Complementary Goods

Steps:

• Identify cars and petrol as complementary goods in joint demand, meaning they are used together.
• An increase in car prices raises the cost of owning a car, reducing quantity demanded for cars.
• Fewer cars purchased leads to less need for petrol to fuel them.
• Thus, demand for petrol shifts leftward, decreasing at every price.

Why C is correct:

• C states demand for petrol decreases, per the cross-price elasticity of demand for complements (negative value), where higher price of one good reduces demand for the other.

Why the others are wrong:

• A incorrectly suggests increased demand, ignoring the complementary relationship.
• B wrongly implies no change, overlooking the derived demand link.
• D misstates the effect as a supply shift, which is irrelevant here.

Final answer: C