Question

Explain with the help of diagrams the effect of the following changes on the demand of a commodity:

A fall in price of a complementary good

Answer 1

For instance, an increase in the price of petrol from OP₀ to OP₁ causes not only a decrease in the demand for petrol, but it also causes a decrease in the demand for cars from OQ₀ to OQ_1, as indicated by negatively sloping curve HR.