If the price of a complementary good increases, then demand would increase or decrease?
You can check the answer of the people under the question at Quora “which would an economist consider a likely complement for coffee“
If the price of a complementary good increases, then demand would increase or decrease?
You can check the answer of the people under the question at Quora “which would an economist consider a likely complement for coffee“
Classical predictions are that demand for complementary goods decrease as the price of any of them increase. Learn that, it will be on the test.
In the real world, though, it is usually very difficult to determine which goods are complementary, and even when they seem very much to be so, humans aren’t nearly as rational as consumers as the economic models prefer.
You do need to learn the classical model, of course, just understand that it’s not going to immediately start making actual market behavior clear and easily predicted.
Complementary goods: the goods which are consumed or used simultaneously are called complementary goods. For example: bread & butter, car & diesel.
I hope this definition is enough to make you understand the concept of complementary goods.
Now, when the price of bread increases, the demand for butter decreases. Why is this so? Because by the law of demand, price and demand are inversely related. As price increases, people demand less of it.
Since, bread and butter are complements so when the price of bread increases, demand for butter decreases… because what use is now of butter (when bread is now expensive) ? (Assuming that butter is consumed with bread alone, which is actually not true and has been assumed only for simplifying matter)
Tried my best to explain 😀
complementary goods:
Two goods for which an increase in price of one leads to decrease in the demand for the other.
Complements are often pairs of goods that are used together.
As inkpot and pen are complements of each other, then, if there will be increase in price of pen the quantity demanded for inkpot decreases.
complementary good or complement is a good with a negative cross elasticity of demand, in contrast to a substitute good.
This means a good’s demand is increased when the price of another good is decreased. Conversely, the demand for a good is decreased when the price of another good is increased.
If goods A and B are complements, an increase in the price of A will result in a leftward movement along the demand curve of A and cause the demand curve for B to shift in; less of each good will be demanded. A decrease in price of A will result in a rightward movem…
Unless the complementary good is a prestige good associated necessarily with the current good, Demand should fall & so cause a price reduction.
Some suppliers will choose to limit supplies if the barriers to entry are strong enough. This may support the unit price & allow switching to a less vulnerable mix of goods.
In a free market price only goes up when supply is down.
In a manipulated market the banks control the value of the money can inflate or deflate price, so the product gains or looses value to be taxed.
Eight O’Clock
When goods are complements, that means they go together. So if the price of one item in the bunch goes up, it affects the entire bundle, making it more expensive. Thus, if one of the bundle’s item goes up in price, it makes the whole bundle more expansive, which lowers demand for the other items that are included.
For example, we have a $7.95 combo meal that includes a burger, fries, and a drink. If we raised the price of the burger, it affects the demand for the other items in the meal. So demand for fries and demand for drinks will also change. And because the burger’s price was increased, that will result in fewer customers ordering the meal, which means lower demand for fries and lower demand for drinks.
So we will have a ch…
Victor Allen’s
If the price of complementary good increases then the demand would decrease
For example car and petrol. If the price of car increases the demand of petrol will decrease as the demand of car will decrease that means people will not buy car so demand of petrol automatically decreases as without car petrol is of no use.
demand will almost always decrease with the rise in prices . I experience that every day in more choices as to what to buy .
Neither. Demand would stay the same. However, the QUANTITY DEMANDED would go down. Quantity demanded is how many items you would buy at specific price points. However, demand as a whole incorporates a lot more than just price.
Complementary goods are two goods which are purchased together, for example hot dogs and ketchup. Let’s use them in our example.
In the case where the price of hot dogs increases, the quantity demanded of hot dogs would fall. As consumers purchase fewer hot dogs, they also purchase fewer ketchup packets. The demand for ketchup will subsequently fall, thereby leading to a reduction in the quantity demanded of ketchup.
Thus, an increase in the price of a good leads to a decrease in quantity demanded of its complement. We can see the same occurring for many other goods which are complements, such as printers and toner.