Sunscreen and beach towels are complementary goods. If the price of sunscreen increases, ceteris paribus
, the demand for beach towels will decrease. This is because higher prices for sunscreen may lead people to spend less money overall on beach-related items, and they may choose to prioritize buying sunscreen over beach towels. As a result, the demand curve for beach towels will shift leftward, indicating a decrease in the quantity of beach towels that consumers are willing and able to buy at each price level. Furthermore, if the price of sunscreen decreases, ceteris paribus, the demand for beach towels will increase. This is because lower prices for sunscreen may encourage people to purchase more beach-related items and they may prioritize buying beach towels over other items. As a result, the demand curve for beach towels will shift rightward, indicating an increase in the quantity of beach towels that consumers are willing and able to buy at each price level.
If the price of sunscreen increases, ceteris paribus (assuming all other factors remain constant), it is likely to have an effect on the demand for beach towels, as they are complementary goods. Here's a step-by-step breakdown of how this might affect the market:
1. Increase in the price of sunscreen: When the price of sunscreen rises, consumers might be hesitant to purchase it or reduce the quantity they buy. This could be due to the higher cost involved.
2. Impact on the demand for beach towels: As sunscreen and beach towels are complementary goods, a decrease in the demand for sunscreen might lead to a decrease in the demand for beach towels as well. This is because people often buy beach towels when they plan to go to the beach and use sunscreen.
3. Decrease in the demand for beach towels: With a decrease in the demand for beach towels, businesses that sell these towels may experience reduced sales. This could potentially lead to a decrease in the price of beach towels if sellers want to stimulate demand.
4. Readjustment of the market: As the price of sunscreen and beach towels is interrelated, changes in the demand for one can influence the demand for the other. If beach towel prices decrease due to the reduced demand, it may incentivize consumers to purchase more beach towels or maintain their previous purchasing behavior.
Overall, an increase in the price of sunscreen, ceteris paribus, might result in a decrease in the demand for both sunscreen and beach towels initially. However, the market will eventually readjust based on consumer behavior and market dynamics.