Question

Use the graphs provided to predict what will happen to the equilibrium price and quantity of oranges if the following events take place Instruction: Depict how this event will affect the market of oranges by dragging the appropriate curve in the graph a. A study finds that a daily glass of orange juice reduces the risk of heart disease.

Answer 1

A. The report will positively affect the demand for the product and this increases the demand for the product. The demand curve will shift to the right and the equilibrium price and the quantity will increase.

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B. Changes in the price is a movement along the demand curve here the price has decreased so the quantity demanded will increase and the quantity supply will decrease and the result will be a shortage for the product.

Ans: Both the equilibrium price and the quantity will decrease.

C. The rise in the wage rate will increase the cost of production for the firms and the firms will cut back their production so the result will be a leftward shift of the supply curve. When the supply curve shifts to the left the equilibrium price increases and the quantity will decrease.

D. The good weather is a positive supply shock to the product and this will shift the supply curve to the right and the equilibrium price will decrease and the quantity will increase.