Question

Suppose that the tofu industry is initially operating in long-run equilibrium at a price level of $5 per block of tofu and quantity of 200 million blocks per year. suppose a leading foodie video blogger raises awareness for a scholarly article that links tofu consumption to premature hair loss and unhealthy skin.

The viral video is expected to cause consumers to demand ___ tofu at every price. In the short run, firms will respon by _____

Answer 1

A viral video suggesting health risks of tofu will lead to reduced demand for tofu at all price points. Firms will respond by producing less in the short run, and the market will adjust to a new equilibrium.

Step-by-step explanation:

The question concerns the impact of a change in consumer preferences on the tofu industry's market equilibrium. With the release of a viral video suggesting negative health effects of tofu consumption, consumers are expected to demand less tofu at every price level. In response to the decreased demand in the short run, firms in the tofu industry will typically reduce production to avoid accumulating unsold inventory.


Prices will likely fall as surplus tofu blocks become available and firms compete to sell their products. This adjustment in quantity demanded and supplied due to a change in preferences illustrates a leftward shift in the demand curve. Over the longer term, individual firms might adjust further by leaving the market if they cannot cover their costs, leading to a new long-run equilibrium.