Question

There is unusually good growing weather that enhances the harvest of oranges and as a result the price of oranges decreases. Show the impact of this event on the equilibrium price and quantity of orange juice.

Answer 1

The Orange is resources that produce orange juice. If the price of Orange falls then it cost less to produce orange juice and the supply of orange juice increases. Also, the quantity of orange juice demanded increases and the movement along the demand curve. Then equilibrium quantity increases (Q to Q1) and equilibrium price falls (Pto P1). It is shown in the diagram.