Answer to Question #222427 in Microeconomics for Laetitia

Question

Using appropriate diagram(s), explain how a decrease in the price of the fresh tomatoes

would affect the demand of canned tomatoes.

Answer 1

If the price of fresh tomatoes decrease. The prices of canned tomatoes will also decrease. This is because the fresh tamatoes are the inputs for canned tomatoes.

This will result to increased demand for canned tomatoes

From the above diagram if the price of canned tomatoes per unit decrease from $P_1$ to $P_2$ and $P_3$ the quantity of demanded for canned tomatoes will increase from $Q_1$ to $Q_2$ and $Q_3$ per period respectively