ECO 100Y
Introduction to
Economics
Exercise 2.1
© Gustavo Indart
Slide 1
Because bagels and cream cheese are often eaten together,
they are complements. 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) An increase in the price of flour.
b) A fall in the price of milk.
c) An increase in the price of milk.
d) A fall in the price of flour.
e) A decrease in the price of muffins, a close substitute
for bagels.
© Gustavo Indart
Slide 2


Outcome:
 Price of cream cheese (PC) increased
 Quantity bought and sold of bagels (B) increased
X
Possible answer:
a) An increase in the price of flour.
PC
Cream Cheese
PB
S’
S
S
D
C
© Gustavo Indart
Bagels
D
B
Slide 3

Outcome:
 Price of cream cheese (PC) increased
 Quantity bought and sold of bagels (B) increased

Possible answer:
b) A fall in the price of milk.
X
PC
Cream Cheese
PB
S
S’
D
C
© Gustavo Indart
Bagels
S
D
B
Slide 4


Outcome:
 Price of cream cheese (PC) increased
 Quantity bought and sold of bagels (B) increased

X
Possible answer:
c) An increase in the price of milk.
PC
Cream Cheese
S’
PB
Bagels
S
S
D
C
© Gustavo Indart
D’
D
B
Slide 5


Outcome:
 Price of cream cheese (PC) increased
 Quantity bought and sold of bagels (B) increased


Possible answer:
d) A fall in the price of flour.
PC
Cream Cheese
PB
S
S
D
C
© Gustavo Indart
Bagels
D’
S’
D
B
Slide 6


Outcome:
 Price of cream cheese (PC) increased
 Quantity bought and sold of bagels (B) increased
X
Possible answer:
e) A decrease in the price of muffins.
PC
Cream Cheese
PB
Bagels
S
S
D
C
© Gustavo Indart
D’
D
B
Slide 7