A consumer's bundle includes goods X and Y. if and Y are complements, then: a. the...

A consumer's bundle includes goods X and Y. if and Y are complements, then:

a. the Engel curve is upward slopping

b. both X and Y will increase with a price decrease in X

c. you cannot illustrate the effect of a change in price of X on Y using a indifference curve graph

Expert Solution

Complementary goods are products which are used together. For example we take car and petrol for daily life example. When prices of one increases it's reduces the consumption of it's complements.

a- The slope of the Engel curve for complements- The Engel curve represents the relationship between good consumption and income of a person ....For various types of goods the Engel curve slope differs ....For complements it is upward rising straight line curve from the origin .Because when consumers money income increases if he prefers to use good x ...he would also have to purchase the complements of x ...that's why the slope of the Engel curve for complements is upward from origin.

b- The law of demand clearly says when price of a commodity falls it's quantity demanded increases and vice versa while other thing remaining constant. When price of commodity decreases it's quantity demanded increases ...but it's simultaneously increases the demand for it's complements ....Fro example when price of a car decreases it's quantity demand increases but on the other hand it increases to he demand for petrol and Diesel ....that's why when price of a commodity decreases it's simultaneously increases the demand for it's complements.

C-Yes we cannot illustrate the effect of change in price of x on y by using indifference curve because here the MRS is zero and the slope of the ics are rightangled as we seen in the above figure.Thats why a slightly change in price of x doesn't affect the demand for y.

Rahul Sunny answered 2 years ago

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