(Make sure to make use of a supply and demands diagram)
Because bagels and cream cheese are often eaten together, they are complements.
Question 1: We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer.
Question 2: Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this patterns- a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer.