Question

What is the effect of changes in gasoline prices on the demand for restaurant meals? Is gasoline an economic complement of restaurant meals? Are restaurant meals an economic complement of gasoline?

Answer 1

As gasoline prices rise, the demand for gasoline decreases, following the law of demand. After this decrease in demand for gasoline, people would want to reduce their consumption of gasoline. And since going to a restaurant to have a meal has a cost of travel attached to it which is directly linked with the price of gasoline, people would prefer to not travel and have a home cooked meal instead. Therefore, if price of gasoline rises, demand for restaurant meals falls.

Same logic follows when the price of gasoline falls. As the price of gasoline decreases, the demand for gasoline would increase and so would demand for restaurant meals. This shows that restaurant meals are an economic complement of gasoline.