The price of donuts increases and at the same time the cost of making coffee dec

Question

The price of donuts increases and at the same time the cost of making coffee decreases. What happens to the price and quantity of coffee?
A.) The price increases and the quantity is indeterminate B.) The price is indeterminate and the quantity decreases C.) The price increases and the quantity decreases D.) The price decreases and the quantity increases The price of donuts increases and at the same time the cost of making coffee decreases. What happens to the price and quantity of coffee?
A.) The price increases and the quantity is indeterminate B.) The price is indeterminate and the quantity decreases C.) The price increases and the quantity decreases D.) The price decreases and the quantity increases
A.) The price increases and the quantity is indeterminate B.) The price is indeterminate and the quantity decreases C.) The price increases and the quantity decreases D.) The price decreases and the quantity increases A.) The price increases and the quantity is indeterminate B.) The price is indeterminate and the quantity decreases C.) The price increases and the quantity decreases D.) The price decreases and the quantity increases

Explanation / Answer

D.) The price decreases and the quantity increases

A decrease in the cost of coffee production leads to an increase in its supply and supply curve shift to right. This leads to an increase in quantity and a decrease in the price of coffee. But the increase in the price of donuts leads to decrease in demand for coffee and demand curve shifts to left, this leads to a decrease in both price and quantity of coffee. Coffee and donuts are complementary goods.

Net effect is price decreases and the quantity increases

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