Question

Consider the market for tomatoes as a perfectly competitive market, and suppose it is currently at a long run equilibrium. Then, suppose the FDA comes out with a favorable report, saying that tomato consumption reduces cancer. Compared to the initial equilibrium, how do the market price and quantity change in the short run?

Answer 1

Perfectly competitive market is very sensitive. If the price changes, the demand will be 0. Demand curve is horizontal in a perfectly competitive market.
However, if consumers find out it reduces cancer, than demand will increase, this price will increase. Quantity demanded will increase; market price will also increase