ACCA Applied Knowledge · Business and Technology · Microeconomic factors
A market for organic coffee beans is in equilibrium. A new health report increases consumers' preference for organic coffee, while nothing changes on the supply side. What is the most likely effect on the market?
A favourable change in consumer tastes shifts the demand curve to the right. With supply unchanged, the new equilibrium has both a higher price and a higher quantity traded, because suppliers move up their existing supply curve to meet the extra demand.
- ADemand curve shifts right, giving a higher equilibrium price and quantityCorrect
- BDemand curve shifts right, giving a higher equilibrium price but lower quantity
- CSupply curve shifts left, giving a higher equilibrium price and lower quantity
- DThere is a movement along the demand curve, giving a lower equilibrium price
Explanation
A change in tastes is a non-price determinant, so the whole demand curve shifts right. Against an unchanged upward-sloping supply curve, the new intersection is at a higher price and a higher quantity. Option B would require supply to fall, which has not happened.
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