Question

Bananas are selling briskly at local stores, and supply is easy to maintain. A nationwide ad campaign emphasizes the health benefits of bananas causing demand to shift to D2. How might store owners respond, and how would it affect the equilibrium price? a) Store owners would increase the price, and equilibrium price would increase. b) Store owners would decrease the quantity supplied, and equilibrium price would increase. c) Store owners would decrease the price, and equilibrium price would decrease. d) Store owners would increase the quantity supplied, and equilibrium price would decrease.

Answer 1

Option A.

Store owners would increase the price, and the equilibrium price would increase.

Explanation: The shopkeeper should increase the price of banana so that the equilibrium price will automatically increase.

• When the demand for bananas increases the value of banana can be increased so that more profit can be made.

• Equilibrium will also increase when demand and price quantity increase.

• The equilibrium point is the price where the quantity of goods demanded is equal to the quantity of goods supply