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Chapter 3: Q. 5- Problems (page 72)

Give an example of a complement and substitute in consumption for each of the following items.

a.Bacon

b.Tennis racquets

c.Coffee

d.Automobiles

Short Answer

Expert verified

Bacon- Complementary: Eggs, Substitute: Sausages

Tennis racquets- Complementary: Tennis balls, Substitute: Badminton racquets

Coffee- Complementary: doughnuts, Substitute: Tea

Automobiles- Complementary: Petrol, Substitute: Bicycle

Step by step solution

01

Step1. Introduction

When a good is consumed along with another, it is called complementary goods. The rise in demand of one would directly and positively affect the demand of other and vice versa.

Eg. shoes and socks.

When a good can be consumed in place of another, they are called substitutes of eachother. This rise in demand of one would negatively affect the demand of other.

Eg. Coke and Pepsi.

02

Step2. Explanation

Bacon- Complementary: Eggs, Substitute: Sausages

Tennis racquets- Complementary: Tennis balls, Substitute: Badminton racquets

Coffee- Complementary: doughnuts, Substitute: Tea

Automobiles- Complementary: Petrol, Substitute: Bicycle

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Most popular questions from this chapter

Distinguish between changes in demand and changes in quantity demanded

In the market for portable power banks(a normal good), explain whether the following events would cause an increase or a decrease in demand or an increase or decrease in the quantity demanded. Also, explain what happens to the equilibrium quantity and the market-clearing price.

a. There is an increase in the price of carry cases for portable power banks.

b. There is a decrease in the price of devices used to charge portable power banks.

c. There is an increase in the number of consumers of portable power banks.

d. A booming economy increases the income of the typical buyer of portable power banks.

e. Consumers of portable power banks anticipate that the price of this good will decline in the future.

Identify which of the following would generate a decrease in the market demand fore-book readers, which are a normal good.

a. An increase in the price of downloadable apps utilized to enhance the thee-book reading experience, which are complements.
b. An increase in the number of consumers in the market fore-book readers.

c. A decrease in the price of tablet devices, which are substitutes.

d. Areduction in the incomes of consumers of e-book readers.

Distinguish between changes in supply and changes in quantity supplied

In Fig 3-9, the current position of the supply curve is S1, and the price of a portable power bank is $3. If the cost of inputs that suppliers utilize to produce portable power banks decreases, will the supply curve shift to S2 or to S3? What is the change in the amount of portable power banks supplied?
See all solutions

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