Using supply and demand curves, show how an increase in the price of shoes affects the price of a pair of socks and the number of pairs of socks bought and sold.
Shoes and socks are complementary items, they are used together so change in price of one will affect the demand of another.
The rise in price of shoes will decrease the demand of socks and vice versa.
It has been further explained with help of demand schedule and graph –
When the price of socks was P the demand for socks was Q represented by demand curve DD and equilibrium point of demand and supply was E.
Supply being same, when the price of shoes rises to P1 the demand falls to Q1 represented by the demand curve D1D1 and equilibrium point of demand and supply shifts to E1.
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