Tapioca is an ingredient used to produce bubble tea, and consumers consider bubble tea to be a normal good. What happens to the equilibrium price and quantity in the market for bubble tea if the cost of tapioca increases and consumer incomes increase?

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Quizplus · Accepted Answer

The increase in the cost of tapioca, a key ingredient, would likely lead to an increase in the production costs for bubble tea, pushing the price up. Additionally, if bubble tea is considered a normal good, an increase in consumer incomes would lead to higher demand, further pushing up the price. The combined effect of these two changes suggests an increase in price, but the effect on quantity is uncertain without knowing the relative magnitudes of the shifts in supply and demand.

Tapioca Is an Ingredient Used to Produce Bubble Tea, and Consumers