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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Ketchup is a complement (as well as a condiment) for hot dogs. If the price of hot dogs rises, what happens in the market for ketchup? For tomatoes? For tomato juice? For orange juice?

To determine

Change in price of related goods and its inter-related effects in the market.

Explanation

Since, Ketchup is a complement for hot dogs, if the price of hot dogs rises lowers the demand for ketchup. The final result is a decline in both the equilibrium price and quantity of ketchup.

As the equilibrium quantity demanded and supplied of ketchup falls, the demand for tomatoes falls, since tomatoes are the input of ketchup. As a result, the equilibrium price and quantity of tomatoes that are sold, declines.

When the price of tomatoes declines, producers of tomato juice face lower input prices...

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