Answer to Question #154532 in Microeconomics for Michael Ashade

Question

Name a complement, and a substitute, for each of the following products.

• Takeaway coffee
• Weekend Break in a hotel in Waterford City.

In the case of one of the above describe what happens to the demand for that product when a) the price of the complement that you have named falls, b) the price of the substitute you have named falls. In each case illustrate what happens on a graph of the demand curve for the product. 

Answer 1

Takeaway coffee: donut is a complement, takeaway tea is a substitute.

Weekend Break in a hotel in Waterford City: dinner in the nearest restaurant is a complement, break in another hotel is a substitute.

a) If the price of the complement falls, then the demand for that product will increase, and the demand curve will shift to the right.

b) If the price of the substitute falls, then the demand for that product will decrease, and the demand curve will shift to the left.