Question

1.      Ocean Spray, an agricultural cooperative association for cranberries growers in Massachusetts, needs to predict what will happen to the price and output of cranberries under the conditions below. What are your predictions? For each part, identify if the event is a supply or demand related and relate to the specific determinant of supply/demand. Please sketch a graph showing the appropriate demand and supply curves and label the changes to the rationing and guiding (allocating) functions.

a.       A major freeze in December 2017 destroys a large number of cranberry fields in the major producing regions of Wisconsin and Massachusetts .

b.      The scientists in the Biology department of the University of Wisconsin - Madison discover a way to double the number of cranberries produced by each cranberry bush.

c.       The American Nephrology Association announces that drinking cranberry juice can reduce the risk associated with kidney stones /failure among the elderly population.

d.      The price of Apple Juice / Cider falls (Apple cider/juice has chemical properties similar to cranberry juice)

e.       The sub-population of the elderly population grows in the U.S. market

Answer 1

A.Due to destruction of raw materials,the supply falls and supply curve shifts to the left.Price rises and quantity falls.

B.Due to rise in production the supply rises and supply curve shifts to the right.Price falls and quantity rises.

C.Due to increased significance of the product the demand rises.Demand curve shifts to the right.Price and quantity both rises.

D.Due to fall in the price of substitute,people consume more substitute and less cranberry juice.Demand falls.Price and quantity both falls.

E.Graph same as c.Due to rise in population,the total number of people demanding the good rises.Price and quantity rises.