Suppose that the demand for coffee rises.This means that the producer surplus for coffee will:
A)increase
B)decrease
C)increase or decrease because the effect is ambiguous
D)neither increase nor decrease because the price hasn't changed

Question

Quizplus · Accepted Answer

An increase in demand for coffee will lead to a higher equilibrium price, which will increase the producer surplus. This is because producers are able to sell their coffee at a higher price, which leads to higher profits and a larger producer surplus.

Suppose That the Demand for Coffee Rises