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A rise in the price of the complementary good leads to
- a)Shift of the demand curve of the given good only
- b)Expansion of the supply curve of the given good only
- c)Contraction of the demand for the given good
- d)Shift of the demand and supply curves of the given good
Correct answer is option 'C'. Can you explain this answer?
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A rise in the price of the complementary good leads toa)Shift of the d...
Complementary good or complement is a good with a negative cross elasticity of demand, in contrast to a substitute good. This means a good's demand is increased when the price of another good is decreased. ... When two goods are complements, they experience joint demand.
A complementary good is a good whose use is related to the use of an associated or paired good. Two goods (A and B) are complementary if using more of good A requires the use of more of good B. For example, the demand for one good (printers) generates demand for the other (ink cartridges).
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A rise in the price of the complementary good leads toa)Shift of the d...
And: Option 'C' is correct because---In ECONOMICS, a COMPLEMENTARY GOODS or COMPLEMENT is a goods with has a NEGATIVE CROSS ELASTICITY of DEMAND, in contrast to a substitute goods. This means a good's DEMAND is INCREASED when the price of another GOODS is DECREASED. Conversely, the demand for a goods is decreased when the price of another goods is increasedSome EXAMPLES of COMPLEMENTARY GOODS are:Cars and Petrol.Shoes and Polish.Samosa and Potato.Computer Hardware and Computer Software.Printer and Ink Cartridges.Torch and Battery.Pencils and Erasers.Gaming Portals and DVD of Game
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A rise in the price of the complementary good leads toa)Shift of the d...
Explanation:
When the price of a complementary good rises, it affects the demand for the given good. Let's understand this concept further by analyzing the relationship between complementary goods and the demand for a given good.
Complementary Goods:
Complementary goods are products that are consumed together or are used in conjunction with each other. The demand for a given good is influenced by the price and availability of its complementary goods. For example, consider the relationship between cars and gasoline. Cars and gasoline are complementary goods because cars require gasoline to operate.
Impact of Complementary Good Price on Demand:
When the price of a complementary good rises, it leads to a contraction of demand for the given good. This occurs due to the following reasons:
1. Substitution Effect: When the price of a complementary good increases, consumers tend to substitute it with other alternatives. In the case of cars and gasoline, if the price of gasoline rises, consumers may reduce their demand for driving and choose other modes of transportation, such as public transport or biking.
2. Decreased Affordability: A rise in the price of a complementary good reduces the affordability of consuming both goods together. For example, if the price of coffee increases, consumers may choose to reduce their consumption of coffee and the complementary good, such as pastries or cookies.
3. Shift in Consumer Preferences: A change in the price of a complementary good may lead to a shift in consumer preferences. Consumers may choose to allocate their budget towards other goods that are more affordable or have become relatively cheaper.
As a result of these factors, the demand for the given good decreases, leading to a contraction in the demand curve. Therefore, option C - Contraction of the demand for the given good is the correct answer.
When the price of a complementary good rises, it affects the demand for the given good. Let's understand this concept further by analyzing the relationship between complementary goods and the demand for a given good.
Complementary Goods:
Complementary goods are products that are consumed together or are used in conjunction with each other. The demand for a given good is influenced by the price and availability of its complementary goods. For example, consider the relationship between cars and gasoline. Cars and gasoline are complementary goods because cars require gasoline to operate.
Impact of Complementary Good Price on Demand:
When the price of a complementary good rises, it leads to a contraction of demand for the given good. This occurs due to the following reasons:
1. Substitution Effect: When the price of a complementary good increases, consumers tend to substitute it with other alternatives. In the case of cars and gasoline, if the price of gasoline rises, consumers may reduce their demand for driving and choose other modes of transportation, such as public transport or biking.
2. Decreased Affordability: A rise in the price of a complementary good reduces the affordability of consuming both goods together. For example, if the price of coffee increases, consumers may choose to reduce their consumption of coffee and the complementary good, such as pastries or cookies.
3. Shift in Consumer Preferences: A change in the price of a complementary good may lead to a shift in consumer preferences. Consumers may choose to allocate their budget towards other goods that are more affordable or have become relatively cheaper.
As a result of these factors, the demand for the given good decreases, leading to a contraction in the demand curve. Therefore, option C - Contraction of the demand for the given good is the correct answer.
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A rise in the price of the complementary good leads toa)Shift of the demand curve of the given good onlyb)Expansion of the supply curve of the given good onlyc)Contraction of the demand for the given goodd)Shift of the demand and supply curves of the given goodCorrect answer is option 'C'. Can you explain this answer?
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