What would happen to the equilibrium price and quantity of lattés if the cost to produce steamed milk,which is used to make lattés,increased,and scientists discovered that lattés cause heart attacks?
A)Both the equilibrium price and quantity would increase.
B)Both the equilibrium price and quantity would decrease.
C)The equilibrium price would decrease,and the effect on equilibrium quantity would be ambiguous.
D)The equilibrium quantity would decrease,and the effect on equilibrium price would be ambiguous.

Question

Quizplus · Accepted Answer

An increase in production costs shifts the supply curve left, reducing quantity and increasing price. A negative health discovery shifts the demand curve left, reducing both price and quantity. The combined effect decreases quantity, but the price effect is ambiguous.

What Would Happen to the Equilibrium Price and Quantity of Lattés