Answer in Microeconomics for Akash #179082
Ketchup is a complement (as well as a condiment) for hot dogs.
If the price of hot dogs rises, what happens to the market?
For tomato juice?
For orange juice?
Ketchup is a complement for hot dogs. Thus, when the price of hot dogs rises, the quantity
demanded of hot dogs declines, lowering the demand for ketchup. This causes a decline in both the
equilibrium price and quantity of ketchup. Because the quantity of ketchup falls, the demand for
tomatoes by ketchup producers falls, so the equilibrium price and quantity of tomatoes fall. When the
price of tomatoes falls, producers of tomato juice face lower input prices, so the supply curve for tomato
juice shifts out, causing the price of tomato juice to fall and the quantity of tomato juice to rise. The fall
in the price of tomato juice causes people to substitute tomato juice for orange juice, so the demand for
orange juice declines, causing the price and quantity of orange juice to fall.