6. Problems and Applications Q10 Because bagels and cream cheese are often eaten together, they are…
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Question “6. Problems and Applications Q10 Because bagels and cream cheese are often eaten together, they are…”
6. Problems and Applications
Q10
Because bagels and cream cheese are often eaten together, they
are complements.
Consider the effect of a fall in the price of flour, an input to
making bagels.
Answer
Answer a: A decrease in flour’s price will result in a lower input price. It will shift the supply curve towards the right. The new equilibrium will have a lower price for the same quantity.
Answer b) In creame and cheese markets. It will cause an increase in demand because the price of the complement is lower. It will shift the demand curve towards the right. The new equilibrium will have a higher price and a greater quantity.
Conclusion
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