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CMA Foundation · Fundamentals of Business Economics and Management · Theory of Demand and Supply

Bread and butter are complementary goods. If the price of butter rises, which result follows for bread, assuming no other change?

Demand for bread decreases, shifting its demand curve leftward. Bread and butter are complements, so a higher butter price cuts butter consumption and so lowers bread purchases at every price. Bread's own price is unchanged, so this is a shift and not a movement along the curve.

  1. AQuantity demanded of bread extends along its demand curve
  2. BDemand for bread decreases, shifting its demand curve leftwardCorrect
  3. CDemand for bread increases, shifting its demand curve rightward
  4. DQuantity demanded of bread contracts along its demand curve

Explanation

Butter and bread are consumed together. A higher price of butter reduces the quantity of butter bought, which reduces the quantity of bread wanted at every bread price. The bread demand curve shifts left, a decrease in demand. Bread's own price has not changed, so a movement along the curve does not occur.

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