Question

If the price of sugar (ps) falls by $5, how does this affect the equilibrium price?

Answer 1

If the price of sugar falls it will affect the quantity supplied of the sugar. As it will lead to the decrease in the supplied quantity.

What causes a fall in the equilibrium price?

A decrease in equilibrium demand and an increase in equilibrium supply will lead to a drop in equilibrium price, but the effect on equilibrium quantity is unpredictable.

Prices will drop because producers are ready to accept a lower price and consumers now place less value on the product, regardless of the amount.

Reduced demand will cause the equilibrium price to fall and the supply to increase.

Thus, it leads to the decrease in supplied quantity.

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