Examine the accuracy of the following statement: "Given that burgers and fries are complementary goods, if the price of fries increases the demand for both goods will fall."
What will be an ideal response?
The statement is not entirely accurate. An increase in the price of fries will reduce the demand for burgers but will lead to a fall in the quantity of fries demanded. This fall in quantity demanded will be shown as an upward movement along the demand curve. As the price of French fries increases, the demand curve for burgers will shift to the left.
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If a firm cannot earn profits in the short run, it will shut down
Indicate whether the statement is true or false
A monopolistic firm operates in two separate markets. No trade is possible between market A and market B. The firm has calculated the demand functions for each market as follows:
Market A p = 15 - Q; Market B p = 11 - Q The company estimates its total cost function to be TC = 4Q. Calculate: a. quantity, total revenue and profit when the company maximizes its profit and charges the same price in both markets b. quantity, total revenue and profit when the company charges different prices in each market and maximizes its total profit