What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

A) Both the equilibrium price and quantity would increase.
B) Both the equilibrium price and quantity would decrease.
C) The equilibrium price would increase, and the equilibrium quantity would decrease.
D) The equilibrium price would decrease, and the equilibrium quantity would increase.

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Anjali Singh · Accepted Answer

Final Answer : C, Explanation :  When the cost of producing a key ingredient like steamed milk increases, it becomes more expensive for companies to produce lattés. This typically leads to a decrease in supply, as producers are either unwilling or unable to supply as much at the previous price. According to the law of supply and demand, a decrease in supply, with demand remaining constant, leads to an increase in price and a decrease in quantity sold.

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