Problems and Applications Q7

Oyster crackers are a complement for clam chowder. If the price of clam chowder falls, the quantity of clam chowder demanded

falls

rises

which

raises

lowers

the demand for oyster crackers. Because of the change in the equilibrium quantity of oyster crackers, the demand for wheat flour by oyster crackers producers

rises

falls

, causing the equilibrium price of wheat flour to

decrease

increase

. This means producers of bread face

higher

lower

input prices, and the supply of bread

decreases

increases

. The resulting

rise

fall

in the price of bread causes people to substitute

away from cereal and toward bread

away from bread and toward cereal

, so the demand for cereal

rises

falls