Use the figure below to answer the following questions. Figure 3.5.2
Original equilibrium at 1.
-Refer to Figure 3.5.2,which represents the market for beans.If the price of peas,a substitute for beans,rises,and the cost of producing beans decreases,what is the new beans equilibrium,ceteris paribus?
A)2
B)3
C)9
D)4

Question

Use the figure below to answer the following questions.  Figure 3.5.2
Original equilibrium at 1.
-Refer to Figure 3.5.2,which represents the market for beans.If the price of peas,a substitute for beans,rises,and the cost of producing beans decreases,what is the new beans equilibrium,ceteris paribus?
A)2 
B)3 
C)9 
D)4

Quizplus · Accepted Answer

When the price of peas (a substitute for beans) rises, the demand for beans will increase because consumers will start buying more beans as an alternative to the now more expensive peas. This shifts the demand curve for beans to the right. At the same time, if the cost of producing beans decreases, the supply of beans will increase as it becomes cheaper for producers to produce beans. This shifts the supply curve for beans to the right. The intersection of the new demand and supply curves will be at a point where both the quantity supplied and demanded of beans are higher than before, which corresponds to option C in a typical supply and demand graph setup.

Use the Figure Below to Answer the Following Questions