Question

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

Answer 1

Answer:

The equilibrium price would increase, and the equilibrium quantity would decrease.

Explanation:

With an increase in the cost of steamed milk, the cost of materials, one of the key factors in pricing decision would rise, which means that the equilibrium price of lattes would also increase. With an increase in price, according to the law of demand, there is a decrease in demand. Therefore, the quantity of lattes sold at the new equilibrium price would decrease.

The equilibrium price would increase, and the equilibrium quantity would decrease.