Question

7. Now, suppose we instead are looking at the market for orange juice. Suppose that a producer of orange juice in Florida estimates its demand function for orange uice to equal OD-5800-2000P+0.08M 1600PGrape Frit Jice where Qp is the Quantity Demanded per month, P is the price of a half-gallon of orange juice, M is consumer income (measured as annual consumer income in Florida), and PR is the price of a half-gallon of grape fruit juice. For this problem, assume that the current market-price of orange juice is S4 per half-gallon, average Florida consumer income is $45000 annually, and the price of grape fruit juice is $3 per half-gallon. What is the quantity demanded of orange juice? What is the price elasticity of demand of orange juice? Is demand elastic or inelastic? Are consumers relatively sensitive or not relatively sensitive to changes in price? Explain. a. b. c. If the orange juice producer decides to raise the price of the orange juice, what will happen to the firm's total revenue? Why did you reach your conclusion? Explain

Answer 1