Question

1. Referring to the  Economics in Practice on page 318: In recent years, some companies have concentrated on increasing their reputation for environmental stewardship, including spending money on green advertising to attract consumers who value this activity. A successful green advertising campaign will most likely ________ for products produced by the companies, resulting in a higher equilibrium price and a larger equilibrium quantity.

   		increase the demand
   		decrease the supply
   		decrease the demand
   		increase the supply

Answer 1

Ans: Increase the Demand

note: A successful green advertisement, will gain the attention of the consumers for the firms contribution Social responsibility and will increase the goodwill of the firm increasing the demand for its products produced. So how increase in demand is going to effect the equilibirium price and quantity?

If you look at the below graph an increase in demand causes an in increase in equilibirium price and quantity. If it was the supply that increased it would only inreases equilibirium quantity and will reduce price.