Barbecue sauce and chicken thighs are complement goods. Suppose that the government places a tax on chicken thighs to discourage the consumption of fatty meat. The partial equilibrium effect of the tax on the barbecue sauce market is for price to ____ and quantity to ____.

Question

Quizplus · Accepted Answer

When the government places a tax on chicken thighs, it makes them more expensive, which likely reduces their consumption. Since barbecue sauce and chicken thighs are complement goods (meaning they are often used together), a decrease in the demand for chicken thighs leads to a decrease in the demand for barbecue sauce. This results in both the price and quantity of barbecue sauce decreasing in the market.

Barbecue Sauce and Chicken Thighs Are Complement Goods