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 fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?
A)The equilibrium point will move from B to A.
B)The equilibrium point will move from B to C.
C)There will be no change in the equilibrium point.
D)The equilibrium point will move from B to E.

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 fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?
A)The equilibrium point will move from B to A. 
B)The equilibrium point will move from B to C. 
C)There will be no change in the equilibrium point. 
D)The equilibrium point will move from B to E.

Quizplus · Accepted Answer

A decrease in the price of fertilizer used on sugar cane will lead to an increase in the supply of sugar (shift of S₂ to S₃). A decrease in tastes for sugar-sweetened soft drinks will lead to a decrease in the demand for sugar (shift of D₁ to D₂). These two changes will cause a decrease in the equilibrium price and quantity. The new equilibrium point will be at C, where S₃ and D₂ intersect.

Figure 3-8 -Refer to Figure 3-8.The Graph in This Figure Illustrates an This