In recent years the cost of producing organic produce in the U.S. has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?
A) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Question

Quizplus · Accepted Answer

The decrease in the cost of producing organic produce has shifted the supply curve to the right. As a result, there is an increase in the equilibrium quantity. The preference for organic produce has led to an increase in demand, shifting the demand curve to the right. This also leads to an increase in the equilibrium quantity. However, the effect on equilibrium price is uncertain as it will depend on the extent to which the increase in supply can match the increase in demand. So, both the supply and demand curves have shifted to the right, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.

In Recent Years the Cost of Producing Organic Produce in the U.S