High School

Raclette is a popular wintertime dish in Switzerland. It is essentially melted raclette cheese over boiled new potatoes. If the price of this cheese decreased, we would expect:

A. An increase in demand both for the cheese and for the new potatoes.
B. An increase in demand for the cheese.
C. A decrease in the demand for new potatoes.
D. An increase in demand for new potatoes.
E. There to be no effect on the demand for either the cheese or the new potatoes.

Answer :

The a decrease in the price of raclette cheese is likely to lead to an increase in the demand for the cheese itself and, indirectly, an increase in the demand for new potatoes as well since they are typically consumed together in the dish.

If the price of raclette cheese, a key ingredient in the dish, decreased, we would expect:

**b. an increase in demand for the cheese.**

Here's the rationale behind this answer:

1. **Substitute Goods**: Raclette cheese and new potatoes are complementary goods when used together in the traditional dish.

When the price of one of the complementary goods (raclette cheese) decreases, it typically leads to an increase in the demand for the other complementary good (new potatoes).

People are more likely to buy and consume new potatoes with the now more affordable raclette cheese.

2. **Income Effect**: A decrease in the price of raclette cheese effectively increases consumers' real income because they can now purchase the same amount of cheese for less money.

With the higher real income, consumers may choose to buy more raclette cheese, which, in turn, increases the demand for it.

3. **Consumer Preference**: Lower prices often attract more consumers and encourage existing consumers to buy more of the product.

This can lead to an overall increase in the demand for raclette cheese.

So, option "b. an increase in demand for the cheese" is the most appropriate choice in this scenario.

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