Question

As the price of milk increases, what happens at the original equilibrium in the market for cereal that signals market participants that the original equilibrium must change?

Answer 1

The quantity of cereal demanded falls and the quantity supplied increases.

Step-by-step explanation:

Milk and cereal are complementary goods - they are consumed together. If the price of milk increases, the quantity of cereal demanded falls and the quantity supplied increases. The equilibrium quantity of cereal rises while the equilibrium price falls.

Check the attached image for a graphical depiction.

I hope my answer helps you.