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4 December, 20:50

For each of the following shifts in the demand curve and associated price change of a complement or substitute item, explain whether the change in the price of the complement or substitute must have been an increase or a decrease. Upper A rise in the demand for a dashboard global positioning minus system device follows a change in the price of automobiles comma which are complements. A rise in the demand for a dashboard global positioning-system device follows a change in the price of automobiles, which are complements. ▼ The price of the complement increased. The price of the complement decreased. Upper A rise in the demand for tablet devices follows a change in the price of ultrathin laptop computers comma which are substitutes. A rise in the demand for tablet devices follows a change in the price of ultrathin laptop computers, which are substitutes. ▼ The price of the substitute increased. The price of the substitute decreased.

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  1. 4 December, 21:08
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    The correct answer is: the price of the complement decreases; the price of the substitute increases.

    Explanation:

    The law of supply and demand formulates five postulates that serve as a frame of reference:

    When demand exceeds supply, the price of the product increases. When supply exceeds demand, the price decreases. When the price decreases, demand decreases and supply increases. When the price increases, demand increases and supply decreases. The price tends to the level at which demand equals supply.

    What are complementary goods?

    However, there are other factors that determine the relationship between supply, demand and price of products. One of them is complementary goods.

    The concept refers to all those products that depend on each other. That is, they are so closely linked that the behavior of one inevitably affects the behavior of the other.
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