Question

Mustard is a complement for hamburgers. If the price for hamburgers falls, what happens to the...

Mustard is a complement for hamburgers. If the price for hamburgers falls, what happens to the market for mustard?

Indicate whether this is a supply change or a demand change in the market for mustard and also what happens to the equilibrium price and equilibrium quantity for mustard.

Show graphically.

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Answer #1

Ans. The relationship between the price and demand of complement goods have a negative relationship. If the price of one good increases, then the demand for the other good decreases, and if the price of one good decreases, then the demand for the other good increases.

It is given that Mustard is a complement for hamburgers. If the price for hamburgers falls, the demand for a mustard increases in the market for mustard. The demand curve for mustard shifts rightward and that leads to an increase in the equilibrium price and the equilibrium quantity of mustard. As it is given in the below diagram that demand curve shifts from D to D1,  the equilibrium price increases from P1 to P2 and the equilibrium quantity of mustard increases from Q1 to Q2.

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