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Consider the markets for both bacon and eggs. Explain the relationship of these two products. What...

  1. Consider the markets for both bacon and eggs. Explain the relationship of these two products. What will happen in each of these markets if the supply of bacon decreases.
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Answer #1

Bacon and eggs are complementary goods.

Complementary goods are those goods which are used together.

Here, if supply of bacon decreases, assuming that demand remains same, the price of bacon increases to a new equilibrium at which the demand would be less than the previous demand due to the increase in price to the new equilibrium. This increase in price of bacon due to decrease in supply leads to decrease in demand of eggs because they're complentary goods.

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