Question

Suppose there is a decrease in the price of butter. What do we expect to happen to the demand for bread? Assume that bread and butter are often consumed together. Select the correct answer below:
a. There will be a decrease in demand for bread.
b. There will be an increase in demand for bread.
c. There will be no change in the demand for bread and no movement along the demand curve.
d. There will be no change in the demand for bread, but there will be a movement up along the demand curve for bread.

Answer 1

Suppose there is a decrease in the price of butter.There will be an increase in demand for bread.

Option (B) is correct

Explanation:

Bread and butter are complementary goods. They are demanded and consumed together. So their demand are positively correlated which means an increase in demand of one will lead to the same increase the demand of other

If the Price of butter decreases,  it will lead to an increase in the demand for butter. With the increasing demand for butter, the demand for bread will automatically increase. Both demands will move in the same direction.