Question

for consumers, goods a and b are complementary goods. the cost of a resource used in the production of A decreases. as a result

the equilibrium price of B will rise and A will fall
the equilibrium proce of both a and b will fall
the equilibrium price of both a and b will rise
the equilibrium price of b will fall and a will rise

Answer 1

The complementary goods are used together. For example shoes and shoe polish are complementary goods. A fall in price of shoes increases its demand and also increases the demand for shoe polish.

Between two goods namely ‘A’ and ‘B’, a fall in the price of resources used in the production of ‘A’ increase its supply. Its supply curve shift to the right. Thus the equilibrium price of ‘A’ falls and at lower price more quantity of ‘A’ will be demanded. Good ‘A’ cannot be used in isolation, thus the consumers demand good ‘B’ while purchasing more of good A. Thus the demand curve of good ‘B’ shift upward leading to an increase in equilibrium price. In short the equilibrium price of ‘A’ will fall while the equilibrium price of ‘B’ rises.

A). the equilibrium price of B will rise and A will fall.