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 of coffee will depend on the relative magnitudes of the shift in demand (increase due to higher consumer preferences) and supply (increase due to lower production costs). If the demand increases more than the supply, the price will rise. If the supply increases more than the demand, the price will fall. If the shifts are equal, the price may stay the same.

A Technological Improvement Lowers the Cost of Producing Coffee