Explain how a fall in the price of milk will a ect the demand for co ee,

assuming they are both complements. [10 marks]

In order to a ectively address this questions, a few key terms need to be de ned.
Demand is de ned as an economic principal that refers to the amount of want that a
market has for a good or service, a compliment is a good that adds value to another and
a non price determinant is a factor other then price that in uences the demand for a
product.

The economic theory that will help me e ectively answer this question is the law of
demand. This economic theory is explained as: ceteris paribus as the price of a product
falls that quantity demanded will increase and vice versa. Another theory that need to be
explained to answer the question a ectively is the non price determinant of price related
goods which is explained as: when the price of a complementary good falls, the demand
for both goods will rise.

In this diagram is what would happen to the

demand of co ee if the price of milk (which
in this scenario is a complement to co ee)
fell. In this diagram shows that the demand
curve has had a rightwards shift, meaning
that there is more demand for co ee. This
is entirely due to the price of the a
complement of co ee, milk, falling in price.
As they are both complementary goods and
therefore jointly demanded if the price of
one good fell then the demand for both
would increase, this is due to it being
cheaper for consumers to be able to have
co ee then it was before meaning that
more people are more likely going to have a
want for it and move the demand curve
rightwards, the demand curve would have a
shift in the scenario as it is a non price
determinant and is a ected by other factors
then price.

In conclusion demand for co ee would rise if there was a fall in price of milk due to it
being a complementary good and adding value to the co ee. So if the milks prices fell
then the demand for both would increase.
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