Recent medical research revealed that the presence of gluten in oats can cause celiac disease in the elderly. Since the elderly
are an important consumer segment in this market, industry experts predicted a fall in the price of commercially-available oats. However, after the publication of the research, the price of oats actually increased. Which of the following, if true, would explain this outcome? (A) Suppliers of oats did not react to the news because they believed any change in demand would be temporary.(B) Another research study noted that the gluten-content in oats, also used as livestock feed, does not affect the animals.(C) All consumers of oats, including the elderly, drastically reduced their consumption.(D) The availability of substitutes, such as wheat and barley, increased in the market.(E) The supply of oats came down drastically, with some major participants exiting the market.
1 answer:
Answer:
E
Explanation:
If supply of oats come down because some major participants exit the market this will decrease the total oat supply. In the demand and supply graph the supply curve will shift to the left. This will cause that the equilibrium quantity decreases but the equilibrium price will increases. The figure attached shows those changes in price and quantity.
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