Raisin bran and milk are complementary goods.A decrease in the price of raisins will
A) increase consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk.
B) increase consumer surplus in the market for raisin bran and increase producer surplus in the market for milk.
C) decrease consumer surplus in the market for raisin bran and increase producer surplus in the market for milk.
D) decrease consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk.

Question

Quizplus · Accepted Answer

A decrease in the price of raisins will lower the cost of producing raisin bran, resulting in a decrease in the price of raisin bran. This will increase the quantity demanded of raisin bran, which will, in turn, increase the demand for milk. As a result, the increase in the demand for milk will increase its price, resulting in an increase in producer surplus. Thus, a decrease in the price of raisins will increase consumer surplus in the market for raisin bran and increase producer surplus in the market for milk.

Raisin Bran and Milk Are Complementary Goods