In the market for soft drinks, one of the industries major suppliers has has decided to exit the market and focus on its snack foods. At the same time, the price of soft drinks has increased and the total amount of soft drink sales has increased. What could have happened in this market to produce this result?

The exit of the major supplier should decrease the supply of soft drinks (leftward shift of the supply curve) and increase the equilibrium price. If the total amount of soft drinks sold has increased, that means that the demand curve for soft drinks shifted to the right increasing the total quantity demanded of soft drinks at all prices.

I prepared a graph that shows what happened here.

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andromache andromache · Answer 2 · 2022-02-03T13:50:23+01:00

The information regarding the supply should be explained below:

The following information should be considered;

The exit of the major supplier represent the decrease the supply of soft drinks and there is an increase the equilibrium price.
In the case when the total amount of soft drinks sold has increased, so the demand curve for soft drinks shifted to the right.

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