Question 38

Low-carb fad decreases demand for high-carb food, leading to a price increase and quantity decrease.

As the low-carb fad decreases the demand for high-carb foods, it causes a shift in the market that results in higher prices and lower quantities of those foods being sold.

A) Price↑ Quantity ↑

This option suggests that both price and quantity would increase, which contradicts the principles of supply and demand. If demand decreases due to a shift toward low-carb diets, prices would not rise while quantities also increase.

B) Price↓ Quantity ↑

This choice indicates that prices would drop while quantities rise, which is not aligned with a decrease in demand. A lower demand for high-carb foods would not lead to an increase in quantity sold; rather, it would likely lead to a decrease in both price and quantity.

C) Price↑ Quantity ↓

This option correctly reflects the situation where a decrease in demand for high-carb foods due to the low-carb fad leads to a higher price for the remaining products and a decrease in the quantity sold. This aligns with economic principles that when demand drops, the equilibrium price tends to rise as sellers attempt to maintain profitability.

D) No change

This option implies that there would be no impact on price or quantity, which is inaccurate. A significant change in consumer preference, such as a shift to low-carb diets, would clearly affect both price and quantity in the market.

Conclusion

The correct answer is C, as it accurately captures the economic outcome of a decrease in demand for high-carb foods due to the low-carb fad, resulting in higher prices and lower quantities sold. All other options fail to reflect the logical effects of demand shifts on market equilibrium.