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Questions
What will be the impact of a rise in price on the demand for its complementary goods?
What will be the impact of a rise in price on the demand for complementary good?
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Solution 1
If the price of the complementary good increases, demand will decrease. If the price of butter rises, it is extremely likely that some people will cease eating it. Consequently, demand for bread will decline.
Solution 2
A rise in the price of a commodity decreases demand for its complementary good, leading the demand curve to move to the left. Because complementary items are demanded together, an increase in the price of the primary good raises the overall cost of combined consumption for the customer. As a result, as people purchase fewer units of the more expensive primary item, their demand for the complementary item decreases.
