Suppose the market for "soda X" is in equilibrium. If the FDA announced today that this soda has been proven to cause a fatal disease, what would be most likely to happen to the equilibrium price and equilibrium quantity of soda X?
A) Price increases and quantity decreases
B) Price decreases and quantity increases
C) Price increases and quantity increases
D) Price decreases and quantity decreases

Question

Quizplus · Accepted Answer

The announcement by the FDA about the fatal disease associated with soda X would decrease the demand for the product. As a result, the demand curve would shift to the left, causing a decrease in both the equilibrium price and equilibrium quantity of soda X. Therefore, the best option is (D).

Suppose the Market for "Soda X" Is in Equilibrium