Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled?

Question

new potatoes. If the price of this cheese decreased we would expect:

A) an increase in demand for the cheese.

B) an increase in demand for new potatoes.

C) no effect on the demand for either of the Raclette ingredients, since this is a traditional dish and its consumption does not depend on the prices of the ingredients.

D) both A and B.

Answer 1

D, if you assume that "increase in demand" means "increase in quantity demanded."  Cheaper cheese means more people will buy it, and since potatoes and cheese serve as complements (both are used together for Raclette) the demand for potatoes should also increase.  However, unless something changes with regard to the supply curve for potatoes, the price of potatoes should actually go up because demand, not quantity demanded, increases in this case.

To summarize:  Cheese price goes down.  Quantity of cheese demanded goes up.  Demand for potatoes, a complementary good, goes up.  Price of potatoes goes up.