The price of apples used to make apple pies has decreased. At the same time, people expect the price of apple pies decrease significantly in the future. Given these two effects, what will happen to the current equilibrium quantity and price of apple pies

Equilibrium quantity of apple pies increases whilst the price of apple pies decreases

Explanation:

Supply is defined as the quantity of a particular good or service that suppliers are willing to produce at a given period of time for a given price. Many factors can affect supply. For example, the number of producers, cost of production, and advancements in technology.

Apples is a major cost in the production of apple pies. When the cost of apples fall, cost of production of apple pies is also likely to fall. Thus, suppliers are willing to produce more since it is cheaper now. This will cause a right-hand shift in the supply curve (refer diagram attached).

The right hand shift causes:

1. Supply curve to move from S1 to S2.

2. Quantity supplied increases from QS1 to QS2.

3. Price falls from P1 to P2.

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