Micro Foundations · intro
What moves on the Supply & Demand diagram
When a complement gets dearer, the joint cost of consumption rises, shifting this good's demand left.
Start at equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change. in the market for good X.
The price of a complement good Y (consumed together with X) rises.
The overall cost of using X rises, demand for X falls at every price, D shifts left.
New equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change.: lower price and quantity of X.
Examiners ask this as: complement price rises, petrol price and cars, printer ink and printers, paired good more expensive.
Other scenarios on Supply & Demand