Question

Consider the following events: Scientists reveal that eating oranges decreases the risk of diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce more oranges. What are the net effects on the equilibrium price and quantity of oranges?

a. An increase in the price of oranges, the change in equilibrium quantity is uncertain.
b. A decrease in the price of oranges, the change in equilibrium quantity is uncertain.
c. An increase in the equilibrium quantity of oranges, the change in equilibrium price is uncertain.
d. A decrease in the equilibrium quantity of oranges, the change in equilibrium price is uncertain.

Answer 1

Answer:

The net effects on the equilibrium price and quantity of oranges are:

c. An increase in the equilibrium quantity of oranges, the change in equilibrium price is uncertain.

Explanation:

The promotion of the eating of oranges by Scientists will increase the demand for oranges.  This increased demand will shift the equilibrium quantity of oranges demanded by consumers.  With the use of the new fertilizer by farmers to increase the production of oranges, the equilibrium quantity of supply will shift with demand.  However, it is uncertain, from the data provided, if the equilibrium price will upward or downward.  This will depend on other market forces, e.g. the market competitiveness.