Question

7. Suppose the price of oranges rises. Ceteris paribus, a. what effects would that have on the market for orange juice? b. what would happen to the quantity demanded of oranges? c. what would happen to the price and quantity of orange juice? d. Draw a demand-supply graph to illustrate the equilibrium condition (price-quantity) in the market for orange juice before orange price went up and after orange price went up.

Answer 1

A) when the price of orange rises, the supply curve will shift leftwards because the orange juice is extracted from orange and now the cost of producing the juice is increased so supply will reduce.

B) when price of orange rises, the price of orange juice also increases so people wil demand less of orange juice now because of its increased price so quantify demanded for orange juice will decrease.

C) price of orange juice will increase and quantity of orange juice will decrease because there is a negative relationship between price and the quantity demanded of the good.

D) part d is attached.