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AP® Microeconomics

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Moderate

Supply and Demand: Banana Splits

APMICR-1LJJZH

Assume banana splits are produced in a perfectly competitive market, and bananas are an important ingredient for producing them. A disease destroys a significant portion of the world's banana trees, leading to higher prices for bananas. At the same time, consumers become increasingly health conscious and as a result are decreasing their purchases of ice cream desserts, including banana splits. What is the most likely impact that these events would have on the equilibrium price and quantity in the market for banana splits?

A

Equilibrium price and quantity will both decrease.

B

Equilibrium price and quantity will both increase.

C

Equilibrium price will decrease while the impact on equilibrium quantity cannot be determined.

D

The impact on equilibrium price cannot be determined while the equilibrium quantity will fall.

E

Neither the impact on equilibrium price nor equilibrium quantity can be determined.