Question

If a pizza restaurant lowers it price on its pizzas, what will happen to the demand...

If a pizza restaurant lowers it price on its pizzas, what will happen to the demand curve for the restaurant's soft drinks, a complement to pizza?

1.The Demand Curve for soft drinks could move in either direction (demand varies)

  

2.The Demand Curve for soft drinks moves to the right (demand increases)

  

3.The Demand Curve for soft drinks moves to the left (demand decreases)

  

4.The Demand Curve for soft drinks does not change (demand unchanged)

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Answer #1

Answer Option B) The Demand Curve for soft drinks moves to the right (demand increases)

Here, Pizza and soft drink are complement goods . Complement goods are goods which are used with each other. Elasticity of demand for complement goods are negative . Increase in price of one decrease the demand of other good. Here there is decrease in price of pizza . Due to decrease in price of pizza , demand of soft drink will increase and demand curve for soft drink moves to the right.

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