When we consider shoes and socks as complementary goods, a decrease in the price of shoes is likely to lead to an increase in the consumption of both shoes and socks. This is due to the fact that these items are often purchased together. Let’s break this down further:
a. Price Decrease of Shoes
When the price of shoes decreases, the demand for shoes generally increases. Consumers, responding to the lower price, will more likely purchase additional pairs of shoes. Since shoes and socks are complements, the increase in the quantity demanded for shoes will lead to an increase in the demand for socks as well. Graphically, the demand curve for shoes shifts to the right, resulting in a higher equilibrium quantity of shoes sold. Consequently, the demand for socks also shifts to the right, as more socks are being purchased alongside the shoes.
b. Increase in Consumer Incomes
When consumer incomes increase, the purchasing power of consumers goes up. Since both shoes and socks are normal goods, an increase in income will lead to a rise in the demand for both items. This is represented graphically by a rightward shift in the demand curves for both shoes and socks. As consumers have more income, they are likely to buy more shoes and, correspondingly, more socks, reinforcing their complementary relationship.
To summarize, a decrease in the price of shoes or an increase in consumer incomes would lead to an increase in the consumption of both shoes and socks, demonstrated through shifts in their demand curves.