A consumer consumes good x.explain the effect of fall in the price of related goods on the demand of x.use diagram showing demand for good x on the x-axis and its price on the y axis.
Answers
Answer:
For example: ink and ink pens. In case of complementary goods, if the price of one good increases then a consumer reduces his demand for the complementary good as well, i.e. a rise in the price of one good results in a fall in demand of the other good.
The joint consumption of these goods satisfies wants of the consumer. For example: ink and ink pens. In case, there is a fall in the price of the complementary good, then the demand for the other good will rise. And in this case, the demand curve for the other good (ink) will shift parallely towards right.
Answer:
The relationship between price and demand for the original and related items is also directly influenced by both substitute and complementary goods. When the price of rice goes up, the demand for wheat will decrease. Similarly, when the price of gasoline goes up, the demand for cars would be affected.
Explanation:
- Regardless of whether a product is complementary or replacement, any change in the price of related items will have a significant impact on demand for product X. As is common knowledge, linked commodities can be either complimentary or a replacement.
- In the case of complementary goods, the price of one good also affects the demand for related goods. For example, if the price of gasoline increases, the demand for that product will likely decline. In the case of substitute goods, when the price of one good rises automatically the demand for related goods increases.
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