In the market for pretzels, which of the following would most likely cause an increase in the equilibrium price?

• A. A decrease in the price of substitute snacks
• B. An improvement in pretzel production technology
• C. An increase in consumer income, assuming pretzels are a normal good
• D. A decrease in the price of pretzel ingredients

Answer: (C)

Verified step by step guidance

1. Identify the factors that affect demand and supply in the pretzel market. Demand factors include consumer income and prices of substitutes, while supply factors include production technology and input prices.
2. Understand how a change in consumer income affects demand for a normal good. For normal goods, an increase in income leads to an increase in demand, shifting the demand curve to the right.
3. Analyze the effect of a decrease in the price of substitute snacks. A lower price for substitutes typically decreases demand for pretzels, shifting the demand curve to the left, which would lower the equilibrium price.
4. Consider the impact of an improvement in pretzel production technology. This usually increases supply by lowering production costs, shifting the supply curve to the right, which tends to lower the equilibrium price.
5. Evaluate the effect of a decrease in the price of pretzel ingredients. Lower input costs increase supply, shifting the supply curve to the right, which also tends to reduce the equilibrium price.