Question
2. (a) Bagels and cream-cheese are complements because they are generally consumed together. If we observe that the equilibrium price of cream-cheese has risen and
2. (a) Bagels and cream-cheese are complements because they are generally consumed together. If we observe that the equilibrium price of cream-cheese has risen and equilibrium quantity of bagel has risen. What could be responsible for this observation- a fall in the price of flour or fall in the price of milk? Illustrate and explain your answer. (b) Suppose now that the equilibrium price of cream cheese has risen and equilibrium quantity of bagels has fallen. What could be responsible for this observation- a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. (c) When an increase in demand will not increase the equilibrium quantity but will increase only the equilibrium price? When an increase in supply will not increase the equilibrium price but will increase only the equilibrium quantity?
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