Pls help me!! 1500 pts to anyone who could help me!! 3. There is equilibrium in
ID: 1097364 • Letter: P
Question
Pls help me!! 1500 pts to anyone who could help me!!
3. There is equilibrium in the purely competitive market for oranges, and the optimal amount of oranges is being produced. Explain if and how the optimal amount of oranges will change if the following events occur:
A. New fertilizers increase the yields of orange trees.
B. Frost destroys part of the orange crop.
C. Frost destroys part of the grapefruit crop. The resulting increase in the price of grapefruits raises the demand for oranges.
D. People get tired of oranges.
4. When the events in problem 3 occur, how does the market system signal that soemthing has changed, and how does it provide incentives for people to behave in constructive ways.
Explanation / Answer
Ans. A. In that case, supply of orange will be increased and there will be a downward shift in the Supply curve, while the Demand Curve will remain same. A new equilibrium point will be created on the new supply curve and original demand curve, where more quantity will be supplied and demanded but at lower price.
B. In that case, supply of orange will be decreased and there will be an upward shift in the Supply curve, while the Demand Curve will remain same. A new equilibrium point will be created on the new supply curve and original demand curve, where less quantity will be supplied and demanded but at higher price.
C In that case, demand of orange will be increased and there will be an upward shift in the demand curve, while the Supply Curve will remain same. A new equilibrium point will be created on the new demand curve and original supply curve, where more quantity will be demanded and supplied but at higher price.
D. In that case, demand of orange will be decreased and there will be a downward shift in the demand curve, while the Supply Curve will remain same. A new equilibrium point will be created on the new demand curve and original supply curve, where less quantity will be demanded and supplied but at lower price.
4. Market System will give signal by changes in the supply and demand of oranges. this will also result in change of price also.