Homework: MEL 2 Score: 0 of 6 pts End of Chapter 4.6 42 of 50 ( Suppose that man
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Homework: MEL 2 Score: 0 of 6 pts End of Chapter 4.6 42 of 50 ( Suppose that many cities begin to pass taxes on carbonated sodas, while at the same time scientists discover a cure for citrus greening, which is reducing orange crops in Florida and Brazil. a. Can we use this information to be certain whether the equilibrium price of orange juice will increase or decrease? b. Can we use this information to be certain whether the equilibrium quantity of orange juice will increase or decrease? Use a demand and supply graph to illustrate your answers to the questions above. 1.) Using the line drawing tool, graph the effect of a tax on carbonated sodas in the market for orange juice by drawing a new demand curve. Label your line 'D2 2.) Using the line drawing tool, graph the effect of a cure for citrus greening in the market for orange juice by drawing a new supply curve. Label your line 'S2 3) Using the point drawing tool, indicate the new market equilibrium. Label your point e2 Carefully follow the instructions above and only draw the required objectsExplanation / Answer
1. The equilibrium price of the orange juices will increase.
This is because taxes on carbonated drinks will decrease the demand for them and the consumers will switch to orange juice. Also, because of reduction in the oranges' crops the production of oranges will decline leading to fall in the supply of orange juice. Hence, increase in the equilibrium price.
2. The equilibrium quantity of the orange juices will decrease.
The reduction in the orange crops will lead to lower supply of oranges and hence orange juice. Also because the demand is high the prices will increase which will make it less affordable for many consumers. The combined effect of these two will lead to lower quantity.
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