Suppose we observe a decrease in the equilibrium price of tuna and an increase in the equilibrium quantity of tuna. This is best explained by:
A)a decrease in the cost of fuel used by tuna fishing boats.
B)a decrease in the tuna population in the oceans.
C)a decrease in the expected future price of tuna.
D)an increase in the price of salmon, a substitute for tuna.

Question

Quizplus · Accepted Answer

A decrease in the price of an input used to produce tuna will increase the supply of tuna. All else equal, this will lead to a decrease in equilibrium price and an increase in equilibrium quantity.

Suppose We Observe a Decrease in the Equilibrium Price of Tuna