Question

An early freeze in Normandy ruins half of the apple harvest . what happens to consumer surplus in the market for apples ?what happens to consumer surplus in the market for cider ? illustrate your answers with diagrams .

Answer 1

Harvest of apple is reduced so the supply is affected adversely. The supply curve of apples would decrease, shifting the supply curve to the left and this results in raising the market price of apples while its sales/quantity would drop.

Consumer surplus is the region between demand curve and price line. With prices being up and demand being unchanged, this area is reduced suggesting a lower consumer surplus now in market for apples

Since cider uses apples as input, lower quantity of apples would make cider expensive and its supply decreases. This would shift the supply curve to the left and this results in raising the market price of cider as well while its sales/quantity would drop. Once again the consumer surplus falls.