The price of wheat used to make cereal has increased. At the same time, the price of milk (a compliment good) has decreased. Given these two events, what do you expect to happen to the equilibrium price and quantity of cereal?
What will be an ideal response?
Equilibrium price will increase, the effect on quantity is ambiguous.
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Suppose a Chinese restaurant provides free tea to its customers. In the economic way of thinking, the restaurant is
A) engaging in predatory pricing of its meals. B) engaging in predatory pricing of tea. C) selling Chinese food below cost. D) doing all of the above. E) almost certainly doing none of the above.
All of the following are new rules affecting the shadow banking system as a result of the Dodd-Frank Act EXCEPT:
A) some trading of derivatives are required to take place on exchanges B) large hedge funds are required to register with the SEC C) firms selling mortgage-backed securities and similar assets are required to hold 5% of the credit risk D) securitized loans must now be insured