Question

Bagels and cream cheese are complementary goods. the price of flour, used to make bagels, has fallen. as a result, the equilibrium price of cream cheese ______ and the equilibrium quantity of cream cheese ______.

Answer 1

I believe the correct terms to fill in the blanks are rises and falls, respectively. As a result, the equilibrium price of cream cheese rises and the equilibrium quantity of cream cheese falls. Complementary goods are known to have a negative elasticity of demand. That is, if the demand of one increases, then the price of the other decreases. The opposite would be true as well.