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I really need help with this question. THANXS IN ADVANCED!
Beer and pizza are compliments because they are often enjoyed together. When the price of beer rises, what happens to the supply, demand, quantity supplied, quantity demanded and the price in the market for pizza?
Please help and explain why. I reallly appreciate it.
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Answers (2)
Complementary goods means that if the price of beer rises, it will cause people to buy less pizza. This would be a decrease in the demand for pizza. The demand curve for pizza will shift to the left to indicate the decrease in demand. This will intersect the supply curve for pizza (which does not change) at a different quantity supplied. The result is a decrease in quantity of pizza and a decrease in the price of pizza.
Summary: supply unchanged, demand decreases, quantity supplied decreases, quantity demanded will be lower but on a different demand curve, and price decreases.
This is a simple opportunity cost question. The pizza demand may remain constant, as the people find a substitute for the beer. Such as soft drinks.