Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium.Pepsi is a substitute for coffee;cream is a complement of coffee.Consider the market for coffee.Assume that all ceteris paribus assumptions continue to hold except for the event listed.
-Refer to Fact 3.5.1.A technological improvement lowers the cost of producing coffee.At the same time,preferences for coffee decrease.The equilibrium quantity of coffee
A)increases.
B)decreases.
C)remains the same.
D)increases or decreases depending on whether the price of coffee falls or rises.
E)increases,decreases,or remains the same depending on the relative shifts of the demand and supply curves.

Question

Quizplus · Accepted Answer

The technological improvement in coffee production (a supply-side change) would tend to increase the quantity of coffee by making it cheaper to produce, shifting the supply curve to the right. However, a decrease in preferences for coffee (a demand-side change) would tend to decrease the quantity of coffee demanded, shifting the demand curve to the left. The overall effect on the equilibrium quantity of coffee depends on the relative magnitudes of these shifts in supply and demand.

Use the Information Below to Answer the Following Questions