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Question
X and Y are complementary goods. The price of Y falls. Explain the chain of effects of this change in the market of X.
Solution
Demand for a commodity X in relation to the price of a complementary good Y:
An increase or decrease in the prices of complementary goods inversely affects the demand for the given commodity. Assume X and Y as two complementary goods, the price of good Y falls, it will lead to a rise in the demand for good X. As the price of good Y falls, the demand curve shift from the equilibrium position and move towards leftwards from D1 to D2.
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