Question

Suppose the price of cherries decreases at the same time Mrs. Smith’s introduces a new and better-tasting cherry pie that consumers love. How will these changes impact the quantity and price levels in the market for cherry pies? Quantity / Price Increase / Indeterminate Increase / Decrease Indeterminate / Decrease Decrease / Increase Decrease / Indeterminate

Answer 1

Answer:

Decrease / Indeterminate

Explanation:

In this scenario the price of cherries is lower so she can buy more to make pies. This increases the quantity she can produce.

The new type of cherry pie that consumers like will increase the demand for it, so this also causes increase in quantity of cherry pies.

With regards to the price we cannot determine if it will rise of decrease.

Normally as quantity demanded for product increases the price will also increase. This allows the seller make more product.

On the other hand a major input that is cherries has decreased in price. So cost of production is lower. This should result in lower price of cherry pies.