Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice, What would we expect to happen to the equilibrium price and quantity in the market for orange juice ?
Correct answer: E. price will increase, quantity is ambiguous.
- A. price will decrease, quantity is ambiguous
- B. The impact on both price and quantity is ambiguous.
- C. Price will increase, quantity will increase
- D. price will increase, quantity will decrease
- E. price will increase, quantity is ambiguous.
Explanation
The frost shifts supply left, while stronger tastes for orange juice shift demand right. Both changes raise price, but one reduces quantity and the other increases it, so the quantity effect is uncertain.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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