Question

Which of the following events would increase the demand for chicken tacos at a local restaurant in Hayward (i.e. shift the demand curve to the right)?

		a decrease in the price of a bottle of beer, a complementary good to chicken tacos
		a decrease in the price of the chicken used in making the tacos
		a decrease in the price of a rival restaurant's chicken tacos
		a decrease in the price of burritos, a substitute good for chicken tacos
		a decrease in consumer income in Hayward, given that tacos are a normal good

Answer 1

Ans: a decrease in the price of a bottle of beer, a complementary good to chicken tacos.

Explanation:

There are different determinants or factors which affect the demand for a good. These factors are:

• Own price of the good
• The price of the related goods ,i.e., the price of substitute goods or price of complementary goods.
• Expectation about future price change
• The income of the consumers.
• The taste and preferences of the consumers.
• Population
• Advertisement expenditure by the company

Any change in own price of a good leads to change in quantity demanded of the good. The change in quantity demanded of a good is represented by a movement along the demand curve. The law of demand states that, other factors remains the unchanged, there is an inverse relationship between own price of good and its quantity demanded.

On the other hand, any change in the factors other than own price leads to change in demand for the good. The change in demand is represented by a shift in the demand curve. An increase in demand is represented by rightward shift and a decrease in demand is represented by a leftward shift in the demand curve.

Here, when the price of complementary good to chicken tacos decreases, the demand for chicken tacos will increases. This will lead to a rightward shift in demand curve of chicken tacos.