Question

suppose the market for \soda x\ is in equilibrium. if the fda announced today that this soda has been proven to cause a fatal disease, what would be most likely to happen to the equilibrium price and equilibrium quantity of soda x?
a. price decreases and quantity decreases
b. price increases and quantity increases
c. price increases and quantity increases
d. price decreases and quantity increases

Explanation:

The FDA announcement that Soda X causes fatal disease will drastically reduce consumer demand for the product. A leftward shift in the demand curve leads to a new equilibrium with both lower price and lower quantity traded in the market.

Answer:

a. Price decreases and quantity decreases