Question

Discuss what happens to the price of orange juice and why in the following scenarios. Support your views with material online. Be prepared to share your views with peers.

Scenarios:

1. A medical study reporting that orange juice reduces cancer is released at the same time that a freak storm destroys half of the orange crop in Florida.

2. The prices of all beverages except orange juice fall by half while unexpectedly perfect weather in Florida results in an orange crop that is significantly larger than normal.

Answer 1

1. Increase: when we consider the first case in which the medical studies suggest that orange juice reduces cancer the demand curve for the orange juice shifts to the right ss demand for orange juice increases. The storm that destroys half of the crop in Florida affects supply which will cause the supply curve of orange juice to shift to the left with these two shifts occurring simultaneously the price of orange juice will increase.

2. Decrease: When the price for other beverags fall in half the demand for orange juice is decreased as many people will drink other beverages compared to orange juice this will result in shifting of demand curve to the left. Oranges are in abundance this will reduce the price of production which helps in increase in supply of orange juice as supply increases the supply curve will shift to right decreasing overall price of the juice.