Coffee and Donuts Are Complements in Consumption

question 85

Multiple Choice

Coffee and donuts are complements in consumption. Suppose bad weather in the coffee producing regions of the world, which shifts the coffee supply curve leftward. How do the general equilibrium price and quantity outcomes compare to the partial equilibrium outcomes for this situation?

• A) General equilibrium price and quantity are higher.
• B) General equilibrium price is higher and quantity is lower.
• C) General equilibrium price is lower and quantity is higher.
• D) General equilibrium price and quantity are lower.

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Definitions:

Market Price

The present rate at which a service or asset is available for sale or purchase in the open market.

Equilibrium Level

The state at which market supply and demand balance each other, resulting in stable prices and quantities.

Surplus

The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price.

Equilibrium Level

The state of balance where market forces such as supply and demand are equal, often used in the context of prices and quantities in markets.