Bagels and cream cheese are complementary goods.Suppose that the price for flour,which is used to produce bagels,increases.The equilibrium price of cream cheese ________,and the equilibrium quantity of cream cheese ________.
A) rises; decreases
B) rises; increases
C) falls; decreases
D) does not change; does not change
E) falls; increases

Question

Quizplus · Accepted Answer

Since bagels and cream cheese are complementary goods, an increase in the price of flour (leading to higher costs for producing bagels, and likely higher prices for bagels) would decrease the demand for both bagels and their complement, cream cheese. This would lead to a fall in the equilibrium price of cream cheese and a decrease in the equilibrium quantity of cream cheese.

Bagels and Cream Cheese Are Complementary Goods