Which of the following statements is true about the impact of an increase in the price of lettuce?

a. The demand for lettuce will decrease.
b. The supply of lettuce will decrease.
c. The equilibrium price and quantity of salad dressing will rise.
d. The equilibrium price and quantity of salad dressing will fall.
e. Both a and d are true.

1 answer

To analyze the impact of an increase in the price of lettuce, we need to consider how this affects other related markets, particularly for substitutes and complements.

  1. Demand for lettuce will decrease: When the price of lettuce rises, consumers may buy less of it because it has become more expensive. So, this statement is true.

  2. Supply of lettuce will decrease: An increase in price typically incentivizes suppliers to produce more, not less, so this statement is likely false.

  3. Equilibrium price and quantity of salad dressing will rise: Lettuce is a complement to salad dressing. If less lettuce is purchased due to its higher price, the demand for salad dressing would likely decrease, leading to lower equilibrium price and quantity for salad dressing.

  4. Equilibrium price and quantity of salad dressing will fall: As stated above, if the demand for salad dressing decreases due to lower consumption of salad (which occurs when lettuce becomes more expensive), it follows that the price and quantity of salad dressing will fall. This statement is true.

  5. Both a and d are true: Since both statements a (the demand for lettuce will decrease) and d (the equilibrium price and quantity of salad dressing will fall) are true, this option is correct.

In conclusion, the true statement is: e. Both a and d are true.