Bagels and cream cheese are complementary goods. Suppose that the price of flour, which is used to produce bagels, increases. The equilibrium price of CREAM CHEESE ________, and the equilibrium quantity of CREAM CHEESE ________.

Question

Quizplus · Accepted Answer

When the price of flour increases, the cost of producing bagels goes up, leading to a decrease in the supply of bagels. Since bagels and cream cheese are complementary goods, the demand for cream cheese will decrease as well, leading to a lower equilibrium price and quantity for cream cheese.

Bagels and Cream Cheese Are Complementary Goods