Answer to Question #179082 in Microeconomics for Akash

Question

Ketchup is a complement (as well as a condiment) for hot dogs.

If the price of hot dogs rises, what happens to the market?

For ketchup?

For tomatoes?

For tomato juice?

For orange juice?

Answer 1

Ketchup is a complement for hot dogs. Thus, when the price of hot dogs rises, the quantity

demanded of hot dogs declines, lowering the demand for ketchup. This causes a decline in both the

equilibrium price and quantity of ketchup. Because the quantity of ketchup falls, the demand for

tomatoes by ketchup producers falls, so the equilibrium price and quantity of tomatoes fall. When the

price of tomatoes falls, producers of tomato juice face lower input prices, so the supply curve for tomato

juice shifts out, causing the price of tomato juice to fall and the quantity of tomato juice to rise. The fall

in the price of tomato juice causes people to substitute tomato juice for orange juice, so the demand for

orange juice declines, causing the price and quantity of orange juice to fall.