Exhibit 13-4: Market for Healthy Hands Lotion

In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. A news investigation reveals the reactions. When the market reacts to this new information, the price will

Question

Exhibit 13-4: Market for Healthy Hands Lotion

​
In Exhibit 13-4, the makers of Healthy Hands Lotion discovered that the lotion ca n cause skin reactions, but it doesn't inform the buyers. A news investigation reveals the reactions. When the market reacts to this new information, the price will

Quizplus · Accepted Answer

When the market discovers that the lotion can cause skin reactions, the demand for Healthy Hands Lotion will decrease due to the negative information. As a result, the price of the lotion will decrease from $5.00 to $4.00 as consumers will be less willing to pay a higher price for a product that can cause skin reactions. Additionally, the quantity demanded will decrease from 50 to 40 units as fewer consumers will be willing to purchase the lotion. Therefore, the correct option is B.