Refer to the provided graph. Suppose consumers do not fully appreciate the beneﬁts of the product whose market is shown in the graph. If an external agency is able to provide full information to
Consumers about the beneﬁts of the product, then
A) the supply curve will shift to the left.
B) the demand curve will shift to the right.
C) both the new equilibrium price and quantity will be lower.
D) the new equilibrium price will be higher but the equilibrium quantity will be either higher or lower.

Question

Refer to the provided graph. Suppose consumers do not fully appreciate the beneﬁts of the product whose market is shown in the graph. If an external agency is able to provide full information to
Consumers about the beneﬁts of the product, then
A) the supply curve will shift to the left. 
B) the demand curve will shift to the right. 
C) both the new equilibrium price and quantity will be lower. 
D) the new equilibrium price will be higher but the equilibrium quantity will be either higher or lower.

Quizplus · Accepted Answer

If consumers are not aware of the benefits of a product, their demand for the product will be lower. However, if they are provided with full information about the benefits of the product, their demand for it will increase. This increase in demand will cause the demand curve to shift to the right. As a result, the new equilibrium quantity will be higher, but the effect on the price is uncertain as it depends on the extent of the shift in the demand curve and the shape of the supply curve. Therefore, option B is the best choice.

Refer to the Provided Graph