Final answer:
The price elasticity of hot dogs is -0.11. Ketchup and hot dogs are complementary goods, and a rise in ketchup price leads to a decrease in hot dog demand. The overall market equilibrium can be affected by the decrease in demand for hot dogs.
Step-by-step explanation:
The price elasticity of hot dogs can be determined using the formula: Percentage change in quantity demanded of hot dogs / Percentage change in price of ketchup. Since the demand for hot dogs falls by 2 percent when the price of ketchup rises by 18 percent, we can calculate the price elasticity of hot dogs as -2/18 = -0.11.
Ketchup and hot dogs are complementary goods, hence a change in the price of ketchup affects the demand for hot dogs. When the price of ketchup rises, the demand for hot dogs falls as people tend to consume less hot dogs without ketchup.
The overall market equilibrium will be affected by the change in demand for hot dogs. When the demand for hot dogs falls, the equilibrium price of hot dogs may decrease as suppliers adjust their prices to maintain sales. The equilibrium quantity of hot dogs may also decrease due to the decrease in demand.