Answer to Question #139020 in Microeconomics for Jackson

Question

Consider the demand for hamburgers again. If the price of a complementary good (for example, hamburgers buns) increases, what will happen to the demand for hamburgers? Draw supply and demand diagram again and show the effect by shifting hamburgers demand curve and show the old CS & PS and the new CS & PS on the graph.

Answer 1

If the price of a complementary good (for example, hamburgers buns) increases, then the demand for hamburgers will decrease, so both equilibrium price and quantity will decrease too. As a result PS will decrease and CS will increase.