1.In market equilibrium, when the price of complement in production decreases, the price in the new...

1.In market equilibrium, when the price of complement in production decreases, the price in the new equilibrium point will be........................

2. In market equilibrium, when the price of complement decreases, the new equilibrium quantity will be ……….……

Solutions

Expert Solution

The answers and explanation are as follows:

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1. In market equilibrium, when the price of complement in production decreases, the price in the new equilibrium point will be higher.

If the price of a complement in production decreases, the supply of the good also decreases. Due to this, the price in the new equilibrium will be higher.

For example, petrol and diesel are complements in production of crude oil. If the market price falls, suppliers will cut down supply of crude oil. Due to adjustment, the new price will be higher than before.

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2. In market equilibrium, when the price of complement decreases, the new equilibrium quantity will be higher.

If the price of a complement decreases, demand for the good will rise. Due to this, the new equilibrium quantity will be higher.

For example, tea and sugar are complements. If tea becomes cheaper, demand for sugar will rise. Thus, the new equilibrium quantity will be higher than before.

Rahul Sunny answered 1 year ago

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