A drought destroys much of the peach crop. As a result, consumer surplus in the peach market:
A) increases.
B) decreases.
C) remains unchanged.
D) equals the deadweight loss increase.

Question

Quizplus · Accepted Answer

A decrease in the peach crop due to drought will result in a decrease in the supply of peaches. This will shift the supply curve to the left, resulting in a higher equilibrium price and lower equilibrium quantity. As a result, the consumer surplus in the peach market will decrease, since consumers will have to pay a higher price for the same quantity of peaches they were buying before the drought. Therefore, the correct answer is B, which is a decrease in consumer surplus in the peach market.

A Drought Destroys Much of the Peach Crop