After the price of milk increases, David buys more eggs and less cereal. For David
A)milk, eggs, and cereal are all complements.
B)milk and eggs are complements, and milk and cereal are substitutes.
C)milk and eggs are substitutes, and milk and cereal are complements.
D)milk, eggs, and cereal are all substitutes.

Question

Quizplus · Accepted Answer

When the price of milk increases, David buys less milk, and since milk and cereal are complements (usually eaten together), he also buys less cereal. However, he buys more eggs, which suggests that eggs and milk are substitutes (he is replacing milk with eggs). Therefore, milk and eggs are substitutes, and milk and cereal are complements.

After the Price of Milk Increases, David Buys More Eggs