A technological improvement lowers the cost of producing coffee. At the same time, consumers' preferences for coffee increase. The equilibrium price of coffee will

Question

Quizplus · Accepted Answer

The equilibrium price will depend on the relative magnitude of the shifts in the demand and supply curves. An increase in consumer preference shifts the demand curve to the right, potentially raising the price, while a technological improvement shifts the supply curve to the right, potentially lowering the price. The net effect on price depends on which shift is larger.

A Technological Improvement Lowers the Cost of Producing Coffee