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

Quizplus · Accepted Answer

A decrease in the price of fertilizer will shift the supply curve to the right, causing a new equilibrium point at the intersection of DS1U1B11S1U1B0 and SS1U1B12S1U1B1 (point C). A decrease in tastes for sugar-sweetened soft drinks will shift the demand curve to the left, causing a new equilibrium point at the intersection of DS1U1B10S1U1B0 and SS1U1B11S1U1B0 (point E). However, since both changes occur simultaneously, the new equilibrium will be at the intersection of DS1U1B10S1U1B1 and SS1U1B12S1U1B0 (point B to C).

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