Answer to Question #263883 in Microeconomics for jawad

Question

Ketchup is a complement (as well as a condiment) for burger. If the price of burger rises, what

happens to the market for ketchup? For tomatoes? For tomato juice? For orange juice?

Answer 1

Because ketchup is a complement to burgers, when the price of one commodity rises, the quantity desired of the other drops due to cross price elasticity of demand. Hence, if the price of burger rises then the the demand for ketchp decreases.

As ketchup consumption declines, ketchup producers' demand for tomatoes declines as well, lowering the equilibrium tomato price and quantity.

When tomato prices fall, tomato juice producers face lower input costs, causing the supply curve for tomato juice to move out, lowering the price while increasing the quantity.

When the price of tomato juice falls, people will switch to tomato juice instead of orange juice, lowering demand for orange juice and lowering the price and quantity of orange juice.