Suppose the price of butter, a complement to bread, increases. At the same time, suppose the price of flour, a key ingredient to the production of bread, falls. How ill both of these factors (the increase in the price of butter and the decrease in the price of four) affect the equilibrium price and quantity of bread? The equilibrium price of bread (Click to select and the equilibrium quantity of bread Click to select)

Question

Business

Bumblebee

17 February, 23:00

Suppose the price of butter, a complement to bread, increases. At the same time, suppose the price of flour, a key ingredient to the production of bread, falls. How ill both of these factors (the increase in the price of butter and the decrease in the price of four) affect the equilibrium price and quantity of bread? The equilibrium price of bread (Click to select and the equilibrium quantity of bread Click to select)

+2

Answers (1)

Know the Answer?

Salvatore Bell · Answer 1

Bread and butter are complimentary goods if the price of butter is increased then the demand for butter will decrease and since bread and butter are used together when the demand of one good is decreased, the demand of the other good will also be decreased and the price of bread will decrease.

Because of this demand curve will shift downward towards the left along with the supply curve.

If the price of flour is decreased it will decrease the price of the bread and the demand of the bread will be increased but again when bread and butter are to be used together then as the demand of butter is decreased then the demand of the bread will also be decreased and at the end the equilibrium price of the bread will decrease.