Answer :
In the market, if the equilibrium price and quantity of plastic water bottles then Quantity decreases and price is indeterminate (option D)
Demand and supply forces are balanced at an equilibrium price. Prices have the propensity to return to this equilibrium unless certain demand or supply characteristics alter. When demand, supply, or both move or change, the equilibrium price will change.
When the government taxes a corporation that makes plastic, the cost will go up because the tax is also levied. Therefore, it would be expensive for the vendors to create plastic bottle units. As a result, the supply would decline, although to what extent is unknown. As a result, the supply curve will turn left.
Similar to how consumers are reluctant to use plastic bottles, their demand would decline, causing the demand curve to shift to the left, though the exact amount of the change is unknown.
As a result, the quantity will undoubtedly decrease, but the effect on price is unpredictable because it depends on how supply and demand fluctuate. The price will rise if the supply decline is greater than the demand decline.
Similarly, If there is a greater percentage decline in demand, prices will drop; otherwise, they will remain unchanged.
But in every situation, the amount will decline.
Therefore, option (D) is correct.
COMPLETE QUESTION: Suppose the government taxes a company that produces plastic water bottles and at the same time consumers become hesitant to use plastic water bottles due to the fear of toxins in the plastic. What would happen in the market to the equilibrium price and quantity of plastic water bottles?
A) Price decreases and quantity is indeterminate
B) Price increases and quantity is indeterminate.
C) Quantity increases and price is indeterminate.
D) Quantity decreases and price is indeterminate
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