Question

Consider the demand for Nintendo Switch, which is currently in equilibrium. If the price of a...

Consider the demand for Nintendo Switch, which is currently in equilibrium. If the price of a new game for the gaming system increases, what happens to the equilibrium price (P*) and quantity (Q*) for Nintendo Switch? Hint: The new game and Nintendo Switch are complements.

Equilibrium price increases, Equilibrium quantity decreases

Equilibrium price decreases, Equilibrium quantity increases

Equilibrium price increases, Equilibrium quantity increases

Equilibrium price decreases, Equilibrium quantity decreases
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Answer #1

Ans. D) Equilibrium price decreases, Equilibrium quantity decreases

Complementary goods - Consume together- Negative relationship between the price of one good and demand for the other good.

When the price of one good increases/ decreases - demand other good decreases/ increases

Since the new game and Nintendo switch are complements. So when the price of a new game increases, demand for Nintendo switch decreases and demand curve will shift leftward in the Nintendo Switch market. It will lead to the equilibrium price and the equilibrium quantity of the Nintendo switch will decrease.

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