Answer to Question #169499 in Microeconomics for Danilla

Question

Explain whether decrease in price of a complementary good will increase supply of the good concerned.

Answer 1

A change in the price of a complement-in-production causes a change in supply and a shift of the supply curve. A decrease in the price of one complement good causes a decrease in the supply of the good concerned since most of the consumers will prefer to go for the complement good since their prices are decreased. This will make the good concerned to reduce in supply in the market since most of the people consume the complement good.