Question

Sharon owned a coffee shop across the street from a major coffee shop. In order to compete, she charged an average of 25% less than the competition. One year, the other coffee shop moved to a new location. Demand in her area stayed the same and Sharon gained the customers that used to go to the competition across the street. She was able to raise her prices by an average of 25%. What law of supply and demand applies to this situation?

a.
Demand stayed the same and supply decreased, so prices went up.
b.
Demand stayed the same and supply increased, so prices went up.
c.
Demand stayed the same and supply decreased, so prices went down.
d.
Demand stayed the same and supply increased, so prices went down.

Answer 1

Answer: A

Step-by-step explanation:

Demand stayed the same and supply decreased, so the prices went up

Answer 2

A
The number of people wanting coffee doesn’t change but her competitor moved meaning she was the only coffee supplier