If the demand for jelly increases, and the price of grapes (used to make jelly)rises

Question

Quizplus · Accepted Answer

If the demand for jelly increases, there will be an increase in the equilibrium price of jelly. However, if the price of grapes used to make jelly also rises, it will increase the cost of production for jelly. As a result, the supply of jelly will decrease, which may cause the equilibrium quantity of jelly to either rise or fall depending on how much the price of grapes increased relative to the increase in demand for jelly. Therefore, the best answer is A because the equilibrium price of jelly will definitely rise, but the effect on the equilibrium quantity is ambiguous.

If the Demand for Jelly Increases, and the Price of Grapes