Using supply and demand curves, show how an increase in the price of shoes affects the price of a pair of socks and the number of pair of socks bought and sold.

Using supply and demand curves, show how an increase in the price of s

1.	Using supply and demand curves, show how an increase in the price of shoes affects the price of a pair of socks and the number of pair of socks bought and sold.
Answer» <html><body><p></p>Solution :Shoes and socks are complementray goods. An <a href="https://interviewquestions.tuteehub.com/tag/increase-1040383" style="font-weight:bold;" target="_blank" title="Click to know more about INCREASE">INCREASE</a> in the <a href="https://interviewquestions.tuteehub.com/tag/price-1165141" style="font-weight:bold;" target="_blank" title="Click to know more about PRICE">PRICE</a> of shoes will cause a decrease in <a href="https://interviewquestions.tuteehub.com/tag/demand-436956" style="font-weight:bold;" target="_blank" title="Click to know more about DEMAND">DEMAND</a> for its complementary goods (socks). As a result, demand curve of socks will shift to the <a href="https://interviewquestions.tuteehub.com/tag/left-1070879" style="font-weight:bold;" target="_blank" title="Click to know more about LEFT">LEFT</a> to `D_(1)D_(1)`. There will be a new equilibrium <a href="https://interviewquestions.tuteehub.com/tag/point-1157106" style="font-weight:bold;" target="_blank" title="Click to know more about POINT">POINT</a> at `E_(1)`. Both equilbrium price and equilibrium qunatity will decline. From `OP-OP_(1)` and `OM-OM_(1)` respectively. <br/> <img src="https://d10lpgp6xz60nq.cloudfront.net/physics_images/MIC_ECO_XI_U04_C11_E01_037_S01.png" width="80%"/></body></html>