Question

Consider the market for apples. The following graph shows the weekly demand for apples and the weekly supply of apples. Suppose new farming technology is developed that enables growers to produce more crops with the same resources.
Show the effect this shock has on the market for apples by shifting the demand curve, supply curve, or both.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

Answer 1

The new farming technology will result in an increase in the supply of apples. This can be seen in the graph by shifting the supply curve to the right. The shift in the supply curve will cause a decrease in the price of apples, as the increase in supply will exceed the demand for apples.

This will result in a decrease in the quantity of apples demanded and an increase in the quantity of apples supplied. As a result, the market equilibrium will shift to a lower price and a higher quantity of apples. The decrease in the price of apples will result in an increase in consumer surplus, as consumers are able to purchase more apples at a lower price.

At the same time, the increase in the quantity of apples supplied will result in an increase in producer surplus, as producers are able to sell more apples at a higher price. Overall, the new farming technology will result in an increase in market efficiency, as the price of apples is set at the lowest possible level, and the quantity of apples produced is set at the highest possible level.

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