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Question
Microeconomics
Posted 8 months ago

Brown sugar is an ingredient used to make churro waffles.
What happens to the price and quantity of churro waffles if the price of brown sugar decreases?

Choose 1 answer:
(A) Price increases; quantity does not change.
(B) Price increases; quantity increases.
(c) Price decreases; quantity increases.
(D) Price increases; quantity decreases.
(E) Price decreases; quantity decreases.
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Answer from Sia
Posted 8 months ago
Solution
a
Decrease in Input Cost: When the price of an input (brown sugar) decreases, the cost of production for churro waffles decreases. This is represented by a downward shift in the supply curve
b
Supply Curve Shift: The decrease in production cost causes the supply curve for churro waffles to shift to the right, indicating an increase in supply
c
Equilibrium Price and Quantity: With an increased supply, the new equilibrium will be at a lower price and a higher quantity, assuming demand remains constant
Answer
(C) Price decreases; quantity increases.
Key Concept
Supply and Demand Shifts
Explanation
A decrease in the price of an input like brown sugar reduces production costs, leading to an increase in supply. This results in a lower equilibrium price and a higher equilibrium quantity for churro waffles.

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