Suppose you observe an increase in the equilibrium price of coffee and a decrease in the equilibrium quantity of coffee. Of the options listed below, this is most consistent with:
A)a decrease in consumer income assuming coffee is a normal good.
B)an increase in the cost of producing coffee.
C)an increase in consumer income assuming coffee is a normal good.
D)a decrease in the cost of producing coffee.

Question

Quizplus · Accepted Answer

An increase in the equilibrium price of coffee and a decrease in the equilibrium quantity of coffee suggest that the supply of coffee has decreased. An increase in the cost of producing coffee would lead to a decrease in the supply of coffee.

Suppose You Observe an Increase in the Equilibrium Price of Coffee