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Figure 5.16 When the Price of a Complement Rises, Demand Falls
At the original prices, the consumer consumes 20 gallons of ice cream and 30 quarts of hot fudge at the utility-maximizing bundle A. When the price of ice cream increases, the consumer’s budget constraint rotates inward from BC1 to BC2. At the new optimal consumption bundle B, the consumer decreases his consumption of ice cream from 20 to 15 gallons and likewise decreases his consumption of hot fudge from 30 to 20 quarts. Since the quantities demanded of both ice cream and hot fudge decreased with an increase in price of only one of those goods, ice cream and hot fudge are considered complements.