Ketchup is a complement (as wll as a condiment) for hotdogs. If the price of hotdogs rises,....?

Question

what happens to the market for ketchup? For tomatoes? For tomato juice? For orange juice?

Answer 1

In my scenario we keep all other factors constant, or ceteris paribus.  Meaning all other extraneous factors are kept the same so we can fully analyze the fundamental impact on each market. Ketchup is a complimentary good, so as the price of hot dogs rise, then the amount sold will drop. (Remember we are ignoring the elasticity of demand, price of substitutes, price level...and so on).  With less hot dogs sold we will also have less ketchup sold.  The cross price elasticity of demand (between hot dogs and ketchup) is what will determine the degree of the decrease in sales.  Tomatoes will also drop in the amount sold.  Tomato juice is interesting, there are more tomatoes available to make tomato juice, but it depends on whether or not the tomato juice market is constricted by a lack of tomatoes.  The supply of tomatoes doesn't necessarily increase.  In short-run micro it would, giving us a lower price and more produced.  And orange juice is a substitute of tomato juice, I think that’s where there trying to go with the question.  So, if orange juice's substitute got less expensive, ceteris paribus, then there would be less orange juice purchases.

I recommend drawing out simple S&D charts for each market .  Remember the degree of change is all dependent on the things we held constant.

Answer 2

I like Ben's answer, but I'm not sure you should ignore the possibility that a substitute for hot dogs might use as much or more ketchup.  What if the typical consumer that used to eat hot-dogs switched to hamburgers, and it was found that the typical hamburger eater used more ketchup on hamburgers than hot dogs?  You might actually get the opposite effects that Ben described so well.   So I would just raise that possibility in your work, but then state you will assume that the substitute foods did not call for as much ketchup and then go into the details as Ben did.