Answer to Question #313976 in Macroeconomics for Theo

Question

The inhabitants of the small country Zumenia mainly uses potatoes to make chips.Therefore they need oil to fry chips.Explain with the aid of diagrams how the equilibrium price and quantity oil will be affected when price of potatoes decrease

Answer 1

Demand for potatoes will increase with the decrease in price and oil being a compliment good its demand will also increase. The shift in demand for oil can be explained in the diagram below;