Question

Question 2. What can cause a movement along a fixed demand curve and what causes shifts in the demand curve? (Based on key terms: determinants of demand).

Question 3. What is the relationship between apple juice and orange juice? (hint: substitute or complements). If the price of apple juice increases, then what will happen in the market of orange juice and in the market for apple juice itself? (hint: refer to the difference between quantity demanded and demand and shifts and movement).

Question 4. Based on hypothetical scenarios: A recent study claimed that eating bananas improves cardio health. In yet another situation good weather increased the production of bananas. Based on these scenarios, analyze the impact this situation will have in the bananas market? (hint: refer to the changes in the equilibrium).

Answer 1

2) Changes in the own price of the good causes movement along a fixed demand curve while changes in factors affecting the demand such as income of consumers, price of related goods, tastes and preferences of consumers, number of consumers etc. bring shifts in the demand curve.

3) Since both are type of juices, they serve a common demand and so apple juice and orange juice are substitutes. If the price of apple juice increases, its quantity demanded will fall following the movement along the demand curve and consumers will rush to buy relatively cheaper orange juice. Hence, in the market of orange juice, demand curve shifts right and its price rises along with its sales.

4) Given that eating bananas has health benefits. This increases the demand for bananas and shifts the demand curve to the right. This raises its price and its quantity demanded and supplied. On the other side, good weather increased the production of bananas which increases its supply. As supply curves shifts to the right, price falls and quantity rises. Overall, the price change is uncertain but quantity will rise.