Figure 3.8

-Refer to Figure 3.8. The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D₁ and S₂ (point B). If there is a decrease in the price of fertiliser used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?

Question

Figure 3.8
 
-Refer to Figure 3.8. The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D₁ and S₂ (point B). If there is a decrease in the price of fertiliser used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?

Quizplus · Accepted Answer

A decrease in the price of fertilizer used on sugar cane will shift the supply curve to the right (S₂ to S₁), leading to a new equilibrium point. A decrease in tastes for sugar-sweetened soft drinks will shift the demand curve to the left (D₁ to D₂), leading to a further change in the equilibrium point. The new equilibrium point will be at point C, with a lower equilibrium price and quantity compared to the initial equilibrium point at B.

Figure 3.8 -Refer to Figure 3.8. the Graph in This Figure Illustrates