Question

Assume we are looking at the market for soda. A medical study is published that says...

Assume we are looking at the market for soda. A medical study is published that says soda causes cancer. How would this market likely be affected

a.Supply increases..A shortage develops..price increases..higher prices prevail

b.Demand decreases..a surplus develops..price declines..lower prices prevail

c.Supply increases..A surplus develops..price increases..higher prices prevail

d.Demand decreases..a shortage develops..price declines..lower prices prevail

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Answer #1

Answer to the question:

Option b: Demand decreases..a surplus develops..price declines..lower prices prevail.

Explanation: As a result of the medical study some people will stop consuming soda. This will shift the demand curve for the soda to the left. This will result in the reducton of the demand. This will develop a surplus in the market since the demand falls short of the supply. As a result the price will decline and the lower price will prevail.

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