Milk and cookies are complements. What will happen after the price of milk goes up? Quantity of milk demanded declines.Demand for milk declines. Quantity of cookies demanded declines.Demand for cookies declines.Group of answer choicesonly 1 is trueonly 2 is trueonly 1 and 4 are trueonly 2 and 3 are trueNone of the other answers is correct.
Question
Milk and cookies are complements. What will happen after the price of milk goes up? Quantity of milk demanded declines.Demand for milk declines. Quantity of cookies demanded declines.Demand for cookies declines.Group of answer choicesonly 1 is trueonly 2 is trueonly 1 and 4 are trueonly 2 and 3 are trueNone of the other answers is correct.
Solution
The correct answer is: only 1 and 4 are true.
When the price of a good (in this case, milk) increases, the quantity demanded for that good decreases. This is a basic principle of economics known as the law of demand. So, statement 1 is true.
Additionally, because milk and cookies are complements, an increase in the price of milk can decrease the demand for cookies. When the price of a complement good rises, consumers tend to buy less of that good and also less of the related good. So, statement 4 is also true.
Statements 2 and 3 are not necessarily true in this scenario. The demand for milk does not decline just because its price goes up - rather, the quantity demanded declines. Similarly, the quantity of cookies demanded doesn't necessarily decline - the overall demand does.
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