Question

Beerand pizza are complements because they are often enjoyed together. When the price of beer risus, what happens to the supply, demand, quantity supplied, quantity demanded, and price in the market for pizza?

Answer 1

Ans) 1) Beer and pizza are complementary so when price of beer increases, demand for pizza decreases, quantity demanded at each price decreases and quantity supplied decreases. However there is no change in supply.

Price decreases.

OG ce -

2) Perfectly competitive market is where there are many sellers and many buyers. Each seller is selling exactly same product (homogeneous products). There is complete information between buyers and sellers. Both buyers and sellers are price takers. There is no barrier to entry and exit.

But in real world, there is no Perfectly competitive market. Rather there exists imperfect competition. For eg- oligopoly.

Oligopoly is a market where few large sellers sell homogeneous or differentiated products. There are significant barriers to entry and exit. Firms are price setters. Eg- cigarette, aluminium, automobile industry, cable tv etc.