If we consider pretzels and beer to be complementary goods, then a decrease in the supply of beer (in the sense of a shift of the supply curve for beer to the left) should:

a. increase in the demand for pretzels.

b. decrease the price of beer.

c. increase the price of pretzels.

d. decrease the demand for pretzels.

e. none of the above.

Solutions

Expert Solution

If the supply of beer decrease i.e. the supply curve shifts to the left then the price of beer will increase and that will also decrease the demand for pretzel in the market, The answer is "D".

Here, the original equilibirum was at A, after the increase in price of beer the demand curve shifts to left and new equilibrium is at B.

Rahul Sunny answered 2 years ago

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