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    Skylar Hsu
    The document discusses the market for orange juice using supply and demand graphs. It asks the reader to use the graphs to explain how equilibrium price and quantity would change given shifts in demand or supply from various scenarios, such as changes in the prices of substitutes and complements, production technology, and expectations about future prices. It also asks the reader to calculate consumer surplus, producer surplus, and total surplus based on an equilibrium price and quantity point provided on a sample supply and demand graph.

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    Markets

    Uploaded by

    Skylar Hsu
    37 views3 pages
    The document discusses the market for orange juice using supply and demand graphs. It asks the reader to use the graphs to explain how equilibrium price and quantity would change given shifts in demand or supply from various scenarios, such as changes in the prices of substitutes and complements, production technology, and expectations about future prices. It also asks the reader to calculate consumer surplus, producer surplus, and total surplus based on an equilibrium price and quantity point provided on a sample supply and demand graph.

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    The document discusses the market for orange juice using supply and demand graphs. It asks the reader to use the graphs to explain how equilibrium price and quantity would change given shifts in demand or supply from various scenarios, such as changes in the prices of substitutes and complements, production technology, and expectations about future prices. It also asks the reader to calculate consumer surplus, producer surplus, and total surplus based on an equilibrium price and quantity point provided on a sample supply and demand graph.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    37 views3 pages

    Markets

    Uploaded by

    Skylar Hsu
    The document discusses the market for orange juice using supply and demand graphs. It asks the reader to use the graphs to explain how equilibrium price and quantity would change given shifts in demand or supply from various scenarios, such as changes in the prices of substitutes and complements, production technology, and expectations about future prices. It also asks the reader to calculate consumer surplus, producer surplus, and total surplus based on an equilibrium price and quantity point provided on a sample supply and demand graph.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    Principle of Microeconomics

    Handout #2

    Question

    Market for Orange Juice:


    Use the graph on the market for orange juice, to answer the following questions. Assume all the
    statements occur ceteris paribus. Note that apple juice is a substitute for orange juice in
    production only and milk is a substitute for orange juice for consumers only. Further, orange
    juice is a normal good.

    For parts a-k, explain the following and show each on a separate graph what happens to demand,
    supply, quantity demanded, quantity supplied, equilibrium price and quantity.

    a. People in this market eat eggs whenever they drink orange juice. Suppose the price of
    eggs decreases.
     Demand for orange juice will shift right, causing price and quantity to rise.
    Equilibrium quantity and price both increases.
    b. The country goes into recession and consumer's income decreases.
     Demand for orange juice will shift left, causing price and quantity to fall.
    Equilibrium quantity and price both decreases.
    c. A new health study shows that orange juice is not as healthy as previously perceived
     Same as part b.
    d. The price of oranges increases.
     Supply for orange juice shifts left, increasing price, and lowering quantity.
    Equilibrium quantity decreases, but price increases.
    e. A new, faster method for the extraction process of producing orange juice is available
     Supply for orange juice shifts right, decreasing price but increasing quantity.
    Equilibrium quantity increases, but price decreases.
    f. There is an increase in the number of companies producing orange juice. Further, the
    price of milk decreases.
     Demand decreases, supply increases, quantity demanded? quantity supply?
    Equilibrium Quantity? Equilibrium price decreases.
    g. Many companies use preservatives when making orange juice. Suppose the price of
    preservatives increases and consumers expect the price for orange juice to decrease in the
    near future
     Demand decreases, supply decreases, quantity demanded decreases, quantity
    supply decreases, equilibrium quantity decreases, equilibrium price?
    h. There is an increase in the number of buyers in the market. Further, since it is
    summertime companies that make orange juice expect the price of orange juice to
    decrease in the near future.
     Demand increases, supply increases, quantity demanded increases, quantity
    supplied increases, equilibrium price increases, equilibrium supplied?
    i. The price of apple juice increases. Further, consumers expect the price of orange juice to
    increase in the near future.
     Demand increases, supply decreases, Quantity demanded? Quantity Supplied?
    Equilibrium quantity? Equilibrium prince increases.
    j. If the price of orange juice was $2.50, there would be a (shortage/surplus?) of.... and we
    would expect the price to ....
     (20-10) Surplus of 10, decrease.
    k. If the price of orange juice was $1.50, there would be a (shortage/surplus?) of... and we
    would expect the price to...
     (20-10) Shortage of 10, increase.
    Question

    Assume equilibrium price of $7, with demand D and supply S2, in the graph shown. What is the
    consumer surplus, producer’s surplus and the total surplus?
     Consumer surplus: [(11-7)x8]/2=16
     Producer surplus: [(7-3)x*]/2=16
     Total surplus: = 16+16=32

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