Multiple answers may be correct: **Title: Understanding the Impact of Price Change in Complementary Goods****Introduction:**This educational material discusses how the change in the price of one good (Good A) affects the demand for a complementary good (Good B). **Concept Explanation:**Understanding the relationship between complementary goods is crucial in economics. Complementary goods are products that are consumed together. For instance, if the price of Good A increases or decreases, it can impact the demand for Good B.**Graph Descriptions:****Graph for Good A:**- **Axes:** The vertical axis (P) represents the price of Good A, while the horizontal axis (Q) represents the quantity demanded.- **Key Points:** - Point W: Price at $140, Quantity at 10 - Point X: Price at $90, Quantity at 35 - Point Y: Price at $70, Quantity at 45 - Point Z: Price at $20, Quantity at 140- **Price Change:** - The price of Good A increases from $20 (represented by point Z) to $70 (represented by point Y). This increase in price leads to a change in demand.**Graph for Good B:**- **Axes:** Similar to Good A, the vertical axis (P) represents the price of Good B, and the horizontal axis (Q) represents the quantity demanded.- **Key Points:** - Point W: Price at $140, Quantity at 10 - Point X: Price at $90, Quantity at 35 - Point Y: Price at $70, Quantity at 45 - Point Z: Price at $20, Quantity at 140- **Demand Shift:** - The graph shows a demand curve shift. As the price of Good A increases from $20 to $70, the individual’s demand for Good B shifts from demand curve D2 to demand curve D1.**Conclusion:**This analysis illustrates how a change in the price of one good can influence the demand for a complementary good. When the price of Good A rises from $20 to $70, there is a corresponding shift in the demand for Good B from D2 to D1. This shift indicates a decrease in the quantity demanded for Good B at various price points, reflecting the complementary nature of the two goods. Understanding these dynamics is essential for both consumers and producers in making informed decisions. ### Identifying Relationships Between GoodsWhen discussing relationships between goods in economics, we classify them into categories such as substitutes or complements based on how the demand for one good responds to changes in the price of another.Here, we examine an example to see how different conditions can lead to goods being classified either as substitutes or complements:1. **Good A and B are substitutes.** - This option posits that Good A and Good B can replace one another.2. **Good A and B are complements.** - This option suggests that Good A and Good B are used together.3. **Good A and B are substitutes because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B.** - This statement explains a specific condition under which goods might be substitutes, focusing on the elasticity of the demand.4. **Good A and B are complements because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B.** - This statement explains a specific condition under which goods might be complements, involving changes in price and demand.5. **Good A and B are substitutes because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed.** - This describes a scenario where an increase in the price of Good A results in a higher demand for Good B, typical for substitutes.6. **Good A and B are complements because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed.** - This describes a situation where an increase in the price of Good A causes a decrease in the demand for Good B, characteristic of complements.7. **Good A and B are complements because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed.** - This option incorrectly indicates that both goods complement each other with both demands rising simultaneously with the price increase, which would be unusual for complementary goods.8. **Good A and B are substitutes because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed.** - This scenario describes a situation where an increase in the price of Good A results in an increased demand for Good B, which is typical for substitute goods.9. **None of the answers

The demand curve for a good is the graphical representation of the relationship between the price of…

Suppose the change in the price of good A from $20 to $70 causes the individual's demand for good B to shift from D2 to D1. Good A Good B $140 $140 $90 $90 $70 $70 $20 $20 D, D, D, D. 10 35 45 70 105 10 35 45 70 140 105 140

Suppose the change in the price of good A from $20 to $70 causes the individual's demand for good B to shift from D2 to D1. Good A Good B $140 $140 $90 $90 $70 $70 $20 $20 D, D, D, D. 10 35 45 70 105 10 35 45 70 140 105 140

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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