The Effect of Price Changes on the Demand and Supply of Separable Goods

Abstract

IN THIS PAPER I shall examine the effect of a change in the price of one commodity on the quantities of separable goods exchanged in equilibrium. I was led to this inquiry by doubts about Hicks' definitions of substitutability and complementarity among commodities.' He divided the change in the demand and supply of one commodity, which results from a change in price of another commodity, into an and a effect. Hicks called the two terms in his equation which measure these effects the income term and the substitution term, respectively, and distinguished substitutability and complementarity between the two commodities by the positive or negative sign of the latter term.2 The following questions then arose: ( i ) Is it not possible that two commodities, originally substitutes for each other, may become complementary when the number of commodities in the preference field changes? If so, what causes this phenomenon? (ii) Hicks did not specify the good undergoing a price change. The same definition, therefore. might well be apDlied to an independent good: is this ad-