Question

Suppose cheese and eggs are complements in consumption. An increase in the demand for cheese, everything else held constant, will cause the demand for eggs to _____ and the equilibrium price of eggs to _____.

Select one:

A.

increase; increase

B.

decrease; increase

C.

increase; decrease

D.

decrease; decrease

Answer 1

Answers is:

A. Increase; increase,

i.e. The demand for eggs will increase (shift to the right) from D to D₁; leading to increase in equilibrium price from P to p₂ as illustrated in a graph below: