Question

Hot dogs and hotdog buns are compliment goods. Suppose the price of hot dogs increases, what impact does this have on the Equilibrium Price and Quantity in the market for hot dog buns? Select one: a. There is no impact on the market for hot dog buns b. Price will increase, Quantity will increase c. Price will decrease, Quantity will increase d. Price will decrease, Quantity will decrease e. Price will increase, Quantity will decrease

Answer 1

It is given that hot dogs and hot dog buns are complementary goods. If the price of hot dogs increases then its quantity demanded will decline. Now consumer are consuming hot dogs and hot dog buns together, the decline in consumption of one of the good will also decrease the consumption of the other. This implies that the demand for hot dog buns decreases and the demand curve shifts to the left. This is going to decrease the equilibrium price and equilibrium quantity in the market for hot dog buns

Option d is correct