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28 November, 14:29

n recent years the cost of producing organic produce in the U. S. has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?

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  1. 28 November, 15:14
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    The equilibrium quantity in the organic produce market will increase. The change in price depends upon the extent of change in demand and supply.

    Explanation:

    Advancement in technology will cause the cost of producing organic products to decline. As the cost of production decreases, the producers will be able to produce more at the same cost. As a result, the supply will increase. This will cause the supply curve to shift to the right.

    At the same time, increased preferences for organic produce will increase its demand. As a result, the demand curve will shift to the right.

    This rightward shift in both the demand and supply curve will increase the equilibrium quantity in the market. The change in price will depend on the extent of change in demand and supply.

    If both demand and supply increase by the same proportion the equilibrium price will remain the same as earlier. If the increase in demand is more than the increase in supply the equilibrium price will increase. If the increase in supply is more than the increase in demand the equilibrium price will decrease.
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