Question 3 Chapter 4, Problems and Applications #10 Because bagels and cream che

Question

Question 3 Chapter 4, Problems and Applications #10 Because bagels and cream cheese are often eaten together, they are complements. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern-a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. a. b.

Explanation / Answer

A) One reason behind increase in quantity of bagels can be fall in the price of flour. Since flour is an important ingredient to make bagels, a fall in the price of flour will make producing bagels cheaper, thereby increasing their supply.

B) Since cream cheese and bagels are complements and consumed together, a rise in the price of cream cheese will make consumers demsnd less of cream cheese and thus less of bagels (as they are consumed together)

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.