Suppose the cost of harvesting merino wool has risen at the same time as consumer preference for merino wool has risen. In the market for merino wool, this would result in the equilibrium price ________ and the equilibrium quantity ________.
A) increasing; increasing or decreasing
B) increasing or decreasing; decreasing
C) decreasing; increasing or decreasing
D) increasing or decreasing; increasing

Question

Quizplus · Accepted Answer

The cost increase leads to a supply decrease (shift left), raising prices. The rise in consumer preference increases demand (shift right), also raising prices. The quantity effect is ambiguous without knowing which effect is stronger, hence it could increase or decrease.

Suppose the Cost of Harvesting Merino Wool Has Risen at the Same