Question

How will a rise in price of complementary affect the equilibrium price of given commodity? Explain the chain of effects​

Answer 1

Answer-

A rise in price of substitues leads to an increase in the demand for the commodity. Hence, the demand curve will shift rightwards. With this increase in demand and supply being the same, equilibrium price will rise with an increase in competition among buyers. This increase in price leads to an increase in supply and a fall in demand. Hence, as a result, equilibrium price and equilibrium quantity rises.

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