A technological improvement lowers the cost of producing coffee. At the same time, consumersʹ 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 supply and demand curves. A technological improvement increases supply, which tends to lower price, while increased consumer preference increases demand, which tends to raise price. The net effect on price depends on which shift is larger.

A Technological Improvement Lowers the Cost of Producing Coffee