Question

You are the manager of a company that produces and sells bacon. The market for bacon was in equilibrium. Recently, however, the prices of both eggs and pig feed have increased. Which of the following answers best explains how the market for bacon will be impacted by these recent trends?

a.

Supply and demand increase. As a result, the equilibrium price of bacon increases.

b.

Supply decreases and demand increases. As a result, the equilibrium quantity of bacon decreases.

c.

Supply and demand decrease. As a result, the equilibrium quantity of bacon decreases.

d.

Supply decreases and demand increases. As a result, the equilibrium price of bacon increases.

e.

Supply increases and demand decreases. As a result, the equilibrium quantity of bacon decreases.

f.

Supply and demand decrease. As a result, the equilibrium price of bacon decreases.

g.

Supply increases and demand decreases. As a result, the equilibrium price of bacon decreases.

h.

Supply and demand increase. As a result, the equilibrium quantity of bacon increases.

Answer 1

Answer

E option is the correct one . As the price of the egg ,pig feed raise will increase the cost price of the bacon and hence as economic rule supply will increase but decrease in the demand as peoples will buy less on high prices hence we can say that Supply increases and demand decreases. As a result, the equilibrium quantity of bacon decreases.

The A ,B,C,D,F,G,H options are the incorrect

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