Cheese is a complement for hamburgers. If the price of hamburgers rises, the quantity of hamburgers demanded , which ___ the demand for cheese. Because of the change in the equilibrium quantity of cheese, the demand for milk by cheese producers , causing the equilibrium price of milk to ___ . This means producers of butter face input prices, and the supply of butter . The resulting in the price of butter causes people to substitute , so the demand for jam .

Cheese is a complement for hamburgers. If the price of hamburgers rises, the quantity of hamburgers demanded will fall, which leads to a fall the demand for cheese. Because of the change in the equilibrium quantity of cheese, the demand for milk by cheese producers will decline, causing the equilibrium price of milk to fall. This means producers of butter face lower input prices, and the supply of butter will rise. The resulting decline in the price of butter causes people to substitute jam for butter, so the demand for the jam will decline.

Explanation:

The given example illustrates how the law of demand and supply are co-related especially in the case of complementary goods. As we know, the demand for hamburgers compliments the requirement of cheese. This is why if there is a hike in the prices of hamburgers, the quantity demanded of hamburgers and cheese both will fall as per the law of demand.  The decrease in demand for cheese would cause a fall in its equilibrium quantity and it would eventually lead to a significant drop in milk prices as well. Lower input prices of milk will encourage the butter producing firms to produce more butter and its supply will increase and causing people to substitute jam with butter.