Question

Suppose that beer and pretzels are complements and that the price of beer rises sharply. according to the material presented in this unit, what should happen to the equilibrium price and quantity of pretzels?

Answer 1

Given:
beer and pretzels are complements
price of beer rises sharply

With this scenario, the equilibrium price and quantity of pretzels will both decrease.

Complement goods means that they go together. The change in one affects the other. Because the price of the beer rises, its demand will decrease and since pretzels is a complementary good to the beer, its demand will also decrease.

So the equilibrium price and quantity of the pretzels will fall.