Question
A technological breakthrough lowers the cost of producing coffee. At the same time, consumer preferences for coffee increase. The equilibrium price of coffee then: (a)
A technological breakthrough lowers the cost of producing coffee. At the same time, consumer preferences for coffee increase. The equilibrium price of coffee then:
(a) It will increase and the equilibrium quantity will fall.
(b) It will fall and the equilibrium quantity will increase.
c) It will increase and the quantity will rise, fall or stay the same, depending on the relative size of the changes in demand and supply.
d) It will increase, fall or stay the same, depending on the relative size of the changes in demand and supply, but the quantity will rise.
Note: please indicate which alternative is correct and explain your reasoning for the other alternatives as well.
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