Question

   

Bacon is 25 percent cheaper now than a year ago and the quantity of bacon bought is up 13 percent on the year. At the same​ time, the bird flu virus is killing millions of​ chickens, raising egg prices.

​Source: CNN Money​, May​ 20, 2015

How do the markets for bacon and eggs influence each​ ot

Answer 1

Bacon and Eggs are substitutes for each other (for people looking for protein food) i.e. people will either demand bacon or Egg or they can use Bacon in place of Egg or Egg in place of Bacon.

An increase in the price of Egg will increase the demand for Bacon and its price and vice versa. In the above scenario, the Bacon is getting cheaper so the demand for the Bacon will increase and that of Egg will decrease bringing its price down too. But because of bird flu, people can't consume Egg so they will demand more Bacon and the price of the Bacon will increase.  

The price of Bacon and egg are positively related if one increases other increases too and if one decreases the other decreases too.