Which of the following statements is true? If the government were to give the Lipton Tea...

Which of the following statements is true?

		If the government were to give the Lipton Tea Co. a subsidy, the supply of tea will increase.
		When a study finds that the consumption of fish is healthy, the demand curve for fish will shift to the left.
		When corn prices increase, the supply of wheat will increase.
		When the price of paper increases, the demand for paperback books will decrease.

Solutions

Expert Solution

1. If the government were to give a subsidy to Lipton Tea Co., it will lead to reduced cost for the production of tea and thus increase in the supply of tea.

2. When a study finds that the consumption of fish is healthy, it will lead to a rightward shift in the demand curve showing a higher level of the quantity being demanded at the same prices.

3. When the prices for corn increase, it will lead to a decrease in quantity demanded corn. However, wheat which is a substitute for corn will see a jump in the demand. Thus, the quantity demanded the wheat will increase. We can't be very sure of the quantity supplied at this moment as supply will depend more on the factors relating to supply rather than demand.

4. When the price for paper increases, it will lead to a decrease in demand for paper books as well as the demand for goods like paperback which are complementary to paper.

Thus, the 1st option is the correct answer.

Rahul Sunny answered 1 year ago

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