Suppose the United States removes the sugar quotas and the market price of sugar drops. Since sugar is an input in chocolate, we would expect consumer surplus in the chocolate market to

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Business

Cordell Summers

27 May, 11:12

Suppose the United States removes the sugar quotas and the market price of sugar drops. Since sugar is an input in chocolate, we would expect consumer surplus in the chocolate market to

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Answers (1)

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Johnny Shields · Answer 1

The consumer surplus will definitely increase.

Explanation:

The reason is that the manufacturers have purchased the sugar at a high price and now it is available at a lower price. So this means that the price of chocolate must decrease in the market if the price of material input is fallen. But the chocolate prices will take time to fall and as the result the customer is willing to pay lower prices but he is forced to pay more because the manufactured chocolates include sugar which was bought at a higher price. So the consumer surplus will increase.