Question

In 2005, Clear Channel (an owner of multiple popular radio stations) spun off concert promoter Live Nation into an independent company. Assume that music radio stations and concerts are complements in consumption.

True or False: The price of concert tickets should rise.

Answer 1

TRUE- The price of the concert tickets should rise.

Complements in consumption; Complementary items are those items that are consumed together.A complementary good is one which is used in conjunction with another good.Complementary goods usually experience joint demand.Therefore,if demand for one good increases the demand for another good increases resulting in increase in the price of goods.

In the given case, music radio stations and concerts are complements in consumption.So,setting up a new company results in increase in demand and thus the price of the concert ticket increases.