Coca-Cola bottlers increased their prices as the price of sugar (an important ingredient in producing Coke) rose sharply in the late 1980s. Under these circumstances, the increase in the price of Coke occurs as a result of a(n):
A)decrease in supply.
B)decrease in demand.
C)increase in supply.
D)increase in demand.

Question

Coca-Cola bottlers increased their prices as the price of sugar (an important ingredient in producing Coke) rose sharply in the late 1980s. Under these circumstances, the increase in the price of Coke occurs as a result of a(n):
A)​decrease in supply.
B)​decrease in demand.
C)​increase in supply.
D)​increase in demand.

Quizplus · Accepted Answer

The increase in the price of sugar, an important ingredient in producing Coke, would result in an increase in the cost of production of Coca-Cola. As a result, bottlers would be less willing to supply the same quantity of Coke at the same price. Therefore, the supply of Coke would decrease, leading to an increase in its price. Hence, the increase in the price of Coke occurs as a result of a decrease in supply.

Coca-Cola Bottlers Increased Their Prices as the Price of Sugar