What will be the effect on equilibrium price and equilibrium quantity, when price of complementary goods increases?

What will be the effect on equilibrium price and equilibrium quantity,

1.	What will be the effect on equilibrium price and equilibrium quantity, when price of complementary goods increases?
Answer» Solution :When price of complementary goods increases, keeping other tactors constant, then demand for the given commodity decreases since it becomes relatively EXPENSIVE to consume the two commodities (the given commodity and its complement) together. It will LEAD to excess supply. This LEADS to competition among sellers, which reduces the price. Fall in price leads to DECREASE in supply and rise in demand. These changes continue till supply and demand become equal at a new EQUILIBRIUM price. As there is a decrease in demand only, both equilibrium price and equilibrium quantity will fall. Refer 'Decrease in Demand' given in Section 11.5 for diagrammatic explanation.