An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will have which result in in the soft drink market?

A) There will be an increase in both the equilibrium price and quantity.
B) Equilibrium quantity will decrease,but equilibrium price may decrease,increase,or stay the same.
C) There will be a decrease in both equilibrium price and quantity.
D) Equilibrium quantity will increase,but equilibrium price may decrease,increase,or stay the same.

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Arely Rodriguez · Accepted Answer

Final Answer : B, Explanation :  The increase in the price of sugar will increase the cost of production for soft drinks, leading to a decrease in the supply of soft drinks. This will cause the equilibrium quantity to decrease. At the same time, the increased concern about tooth decay may decrease the demand for soft drinks, causing the demand curve to shift to the left. However, the effect on equilibrium price is ambiguous as it will depend on the relative magnitude of the shifts in supply and demand curves. Therefore, equilibrium price may decrease, increase, or stay the same.

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