Suppose new research shows that soy milk and other products derived from soybeans provide more health benefits than previously thought. At the same time, drought conditions result in extensive damage to the soybean crop. What will be the combined impact of these two factors on the equilibrium price and quantity of soybeans?
A) Price will decrease, but the effect on quantity is indeterminate.
B) Price will increase, but the effect on quantity is indeterminate.
C) Quantity will decrease, but the effect on price is indeterminate.
D) Quantity will increase, but the effect on price is indeterminate.

Question

Quizplus · Accepted Answer

The new research showing increased health benefits will lead to an increase in demand for soy products, including soybeans. However, the drought conditions result in a decrease in the supply of soybeans. The combined effect of these two factors is that the price of soybeans will increase, but the effect on quantity is indeterminate as it depends on the extent of the decrease in supply caused by the drought conditions.

Suppose New Research Shows That Soy Milk and Other Products