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Happen-To-The-Price-And-Quantity-Of-Butter: However, If The Quantity Demanded of Good A Increases, Then The Quantity of

If the price of bread rises: - The quantity demanded of bread decreases - The quantity demanded of butter (a complementary good to bread) also decreases - The demand curve for butter shifts left, causing the price of butter to decrease

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Subrata Roy
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74 views2 pages

Happen-To-The-Price-And-Quantity-Of-Butter: However, If The Quantity Demanded of Good A Increases, Then The Quantity of

If the price of bread rises: - The quantity demanded of bread decreases - The quantity demanded of butter (a complementary good to bread) also decreases - The demand curve for butter shifts left, causing the price of butter to decrease

Uploaded by

Subrata Roy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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https://www.quora.com/If-a-complementary-goods-bread-price-has-risen-what-will-
happen-to-the-price-and-quantity-of-butter

Just as a start, here’s an easy trick to remember what happens with complementary goods!

Assuming you have goods A and B that are complementary:

 If the price of good A increases, then the price of good B will decrease


 However, if the quantity demanded of good A increases, then the quantity of
good B will also increase
(This rule also applies the other way with decreases in price/quantity demanded of good A)

Now onto the theory behind it (I will add diagrams at a later time as a visual aid).

In your scenario, your complementary goods are bread and butter. We are going to assume
that these goods are normal goods.

Originally, both goods are at an equilibrium price and quantity.

When the price of bread rises, the supply curve moves upward (to the left) along the
demand curve. Here we notice that since price has increased, quantity demanded has
decreased.

If we want to look at the long run, to get back to our original equilibrium, the demand curve
has to travel downward (to the left) along the supply curve. Once we have been forced back
into equilibrium (both curves have shifted), we see that we have arrived back at our original
price, but our overall quantity demanded is lower.

Since bread and butter and complementary goods, this means that they are used together.
When people eat less bread, they consume less butter because they have nothing to eat
their butter with!

Since the quantity demanded of bread has decreased, we can assume that the quantity
demanded of butter has also decreased. This leads to an downward (left) shift of the
demand curve along the supply curve, which also causes a decrease in price.

Again, if we’re going into the long run, to arrive back to our equilibrium price the supply
curve will have to travel upward (left) along the demand curve, further decreasing demand
for butter.

At the end of it all:

 Price of bread has gone up


 Quantity demanded of bread has gone down
 Quantity demanded of butter has gone down
 Price of butter has gone down

1. Assume peanut butter and jelly are complements.  What will happen to the demand
or quantity demanded for jelly if the price of peanut butter increases?
 
Answer:  The demand curve for jelly will shift to the left (decrease).  Since you
would buy less peanut  butter when its price increases, you will also buy less
jelly (since they are complements).

7.  Assume that bread and butter are complements.  Also assume that bread is a
normal good.  What will happen to the demand or quantity demanded for bread if the
price of butter increases AND the income of the people who buy bread increases? 
(Hint: shift one at a time but on the same graph).
 
Answer:  The demand curve for bread will shift to the left (decrease) due to
the price of butter increasing (we will buy less butter and therefore also less
bread since they are complements) and then there will be another shift in the
demand curve for bread (on the same graph) - it will shift to the right (since
buy definition a normal good is a good we buy more of if our income goes
up).  So you will shift the curve to the left and to the right -- SHOW both shifts
on your graph.
 
8.  Assume that apples are an inferior good.  Also assume that apples and oranges are
substitutes, and that apples and caramel are complements.  What will happen to the
demand or quantity demanded for apples if the price of oranges decreases AND the
income of the people who buy apples increases AND the price of caramel increases? 
(Hint: shift one at a time but on the same graph).
 
Answer:  The demand curve for apples will first shift tot he left (due to the
price of oranges dropping - so some people will buy more oranges and fewer
apples) and then the demand curve for apples will shift to the left again (since
income increased and apples are an inferior good) and the demand curve for
apples will shift left a third time (since we will buy less caramel and therefore
fewer apples - since they are complements).  Show ALL THREE SHIFTS TO
THE LEFT with three single arrows.
 

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