Question

In recent years the cost of producing organic produce in the United States has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?

A) Both the supply and demand curve have shifted to the right. As a result there has been an increasein both the equilibrium price and the equilibrium quantity B)The supply has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on equilibrium price C) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result there has been an increase in the equilibrium price and anuncertain effect on equilibrium qunatity D) Both the supply and demand curves have shifted to the right. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price

Answer 1

The correct answer is option D.

Step-by-step explanation:

Suppose technological advancement has helped in decreasing the cost of producing organic produce. This means that the farmers can now produce more at the same cost. As a result, the supply of organic produce will increase. This will cause a rightward shift in the supply curve.

At the same time, the demand for organic produce has increased. This will lead to a rightward shift in the demand curve.

The rightward shift in both demand and supply curve will lead to an increase in the equilibrium quantity. The change in the price level depends on the extent of the change in demand and supply.