Question

One of the most important ingredients in bubble tea is the tapioca pearls that are added to the tea. If the price of tapioca flour increases, what will happen to the supply of bubble tea, all else being equal?
a) The supply of bubble tea will increase modestly.
b) The supply of bubble tea will not change.
c) The supply of bubble tea will increase dramatically.
d) The supply of bubble tea will decrease.

Answer 1

Answer: The correct answer is "d) The supply of bubble tea will decrease.".

Explanation: If everything else remains constant: An increase in the price of tapioca flour causes producers a higher cost, therefore this higher production cost will cause a decrease in supply.