Consider the Market for Cupcakes, Which Is Currently in Equilibrium

question 42

Multiple Choice

Consider the market for cupcakes, which is currently in equilibrium. Now, suppose that two events happen simultaneously: (1) the price of sugar, used in the production of cupcakes, decreases and (2) the American Heart Association announces that consumption of excess sugar is extremely dangerous to one's health, reducing the popularity of cupcakes. What effect might these events have on the market for cupcakes?

• A) The equilibrium price will fall and the equilibrium quantity will rise.
• B) The equilibrium quantity will fall, but the change in the equilibrium price cannot be determined.
• C) The equilibrium price will rise and the equilibrium quantity will fall.
• D) The equilibrium price will fall, but the change in the equilibrium quantity cannot be determined.

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