Question

30

The graph below depicts the market for oranges. a. Use the diagram below to illustrate that research indicated that drinking orange juice might increase the risk of health disease, while at the same time the economy is experiencing perfect growing conditions for oranges. Instructions: Use the tools provided D2 and S2' to draw new lines that reflect the market effect of this event. Plot only the endpoints of each line Market for Orange Juice Tools D2 9 Q, Quantity of orange juice b. The net effect on equilibrium price is (Click to select) and equilibrium quantity is (Click to select

Answer 1

A research study indicated that drinking orange juice could lead to health disease. This would decrease the demand for orange juice in the market. Similarly, favorable conditions in the market would increase the supply of oranges in the market. The effect of this is graphically shown as follows: Price S' Quantity The net effect on equilibrium price is declined. The effect on quantity cannot be determined as it depends on the magnitude of shift in demand and supply. If the magnitude of shift in supply is more than the demand, then equilibrium quantity incraeses and vice versa