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 fertiliser 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 decrease the cost of producing sugar, causing supply to increase and shift to the right from S₂ to SS1U2B12S1U2B0. The decrease in tastes for sugar-sweetened soft drinks will decrease demand and shift to the left from D₁ to DS1U3B11S1U3B0. The new equilibrium point will be at the intersection of the new supply and demand curves at point C. Therefore, the equilibrium point will move from point B to point C.

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