Asked by Shaniqua Esdaille on Jun 13, 2024
Verified
In the market for chewing gum,the current price is 50 cents per pack and 100,000 packs are sold.Which of the following events is most likely to result in a new equilibrium price of 60 cents and quantity of 90,000 packs?
A) An increase in the price of other kinds of candy
B) An increase in the price of the ingredients used to make chewing gum
C) A decrease in the number of young people in the population
D) An agreement among workers in the chewing gum industry to work for lower wages
E) An increase in income of consumers of chewing gum
Equilibrium Price
The price at which the quantity of goods supplied is equal to the quantity of goods demanded, also known as the market-clearing price.
Equilibrium Quantity
The quantity of goods or services that are supplied and demanded at the equilibrium price, where the amount producers are willing to sell equals the amount consumers are willing to buy.
Price of Ingredients
The cost of raw materials used in the production of goods, which can impact the final price of the product and profitability of producers.
- Understand the fundamentals of market equilibrium and the repercussions of supply and demand fluctuations on equilibrium price and quantity.
- Study market conditions to comprehend the impact of shifts in supply and demand on the directional transformation of equilibrium price and quantity.
Verified Answer
RC
Reanne CuachonJun 16, 2024
Final Answer :
B
Explanation :
Option B, an increase in the price of the ingredients used to make chewing gum, is most likely to result in a new equilibrium price of 60 cents and quantity of 90,000 packs. With the increase in the price of ingredients, the cost of production of chewing gum will increase. To maintain the same profit, producers will need to increase the price of the gum, resulting in a new equilibrium price. The decrease in demand due to the increase in price will lead to a decrease in the quantity of gum sold, resulting in a new equilibrium quantity. Therefore, option B is the best choice.
Learning Objectives
- Understand the fundamentals of market equilibrium and the repercussions of supply and demand fluctuations on equilibrium price and quantity.
- Study market conditions to comprehend the impact of shifts in supply and demand on the directional transformation of equilibrium price and quantity.