Question

Falling oil prices would significantly lower the cost of production for many goods. Producers of plastic kayaks, for instance, would be able to produce larger quantities of their product given the decrease in input costs. Which of the following illustrates how consumers respond to the price incentive brought about by the subsequent increase in supply?(1 point)

Rising prices lead consumers to purchase fewer kayaks.

Rising prices lead consumers to purchase more kayaks.

Falling prices lead consumers to purchase fewer kayaks.

Falling prices lead consumers to purchase more kayaks.

Answer 1

Falling prices lead consumers to purchase more kayaks.

Explanation: Lower oil prices reduce production costs, shifting supply right, which lowers equilibrium price and raises equilibrium quantity — consumers buy more at the lower price.