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  3. the following diagram represents the market for butter for each of...

Question: the following diagram represents the market for butter for each of...

Question details

The following diagram represents the market for butter.

Assessed2Picture1.png

For each of the following scenarios, determine the effect on the equilibrium price and the equilibrium quantity in the market for butter.

First scenario

1) The cost of milk (an input for butter) increases. The equilibrium price

a) increases

b) decreases

and the equilibrium quantity

a) increases

b) decreases

 

Second Scenario

2) New technology allows the sellers of butter to produce more butter for a given level of inputs. The equilibrium price

a) increases

b) decreases

and the equilibrium quantity

a) increases

b) decreases

 

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