Suppose that the market for soybeans is initially in equilibrium. Further suppose that there is a decrease in the price of fertilizer. Which of the following accurately describes the new equilibrium?
A)The equilibrium price will rise; the equilibrium quantity will fall.
B)The equilibrium price will rise; the equilibrium quantity will rise.
C)The equilibrium price will fall; the equilibrium quantity will fall.
D)The equilibrium price will fall; the equilibrium quantity will rise.

Question

Quizplus · Accepted Answer

A decrease in the price of fertilizer would lower the cost of production for soybeans, making it more profitable for farmers to produce and supply more soybeans at every price. This would lead to an increase in the supply of soybeans, shifting the supply curve to the right. As a result, the equilibrium price would fall, and the equilibrium quantity would rise. Therefore, choice D is the correct answer. A decrease in the price of fertilizer will result in a lower cost of production for soybeans. As a result, the supply curve will shift to the right, causing the equilibrium price to fall and the equilibrium quantity to rise. Therefore, the correct choice is D.

Suppose That the Market for Soybeans Is Initially in Equilibrium