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Hot dogs and hot dog buns are complementary goods. Therefore, when the price of hot dogs goes up, what happens in the market for hot dog buns?

MCQ Options:
a. The demand for hot dog buns increases.
b. The demand for hot dog buns decreases.
c. The supply of hot dog buns increases.
d. The supply of hot dog buns decreases.

1 Answer

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Final answer:

The demand for hot dog buns is expected to decrease when the price of hot dogs increases, given that they are complementary goods. As for the overall demand for hamburgers in the face of increased prices of both hot dogs and hamburger buns, it is hard to predict without further data.

Step-by-step explanation:

When the price of hot dogs goes up, and hot dogs and hot dog buns are complementary goods, the demand for hot dog buns is likely to decrease. This is because the two products are used together, so as the price of hot dogs increases, fewer people will buy them, which in turn reduces the number of buns people need. Hence, in the market for hot dog buns, based on the complementary nature of the goods, the correct answer would be option b. The demand for hot dog buns decreases.

Additionally, considering the scenario where the price of a substitute good like hot dogs increases while the price of a complement good like hamburger buns also increases, the demand for hamburgers may become uncertain. If the substitute becomes more expensive, people might switch to hamburgers, increasing their demand. However, because the price of the complement (hamburger buns) also rises, it might offset the increased demand for hamburgers, as the entire meal combination becomes more expensive. Typically, these opposing effects make it difficult to predict the exact change in demand without additional information or specific data about consumer preferences and elasticity.

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