Question

Using the point drawing tool, indicate the new equilibrium price and quantity. Label the point 'E2'.Carefully follow the instructions above, and only draw the required objects. In what sense do consumers of oranges now "pay" for dealing with the spillover costs of pesticide production?- The price of oranges to consumers is higher

Answer 1

Answer:

Orange consumers will bear the burden of now having to pay a higher price than they previously did.

Explanation:

According to the question, orange growers believe that pesticides is a crucial input in the production of oranges. When the government imposes a tax or regulation on the use of pesticides, this is likely to cause the following effects:

1. Since pesticides is an input that is now taxed, cost of production increases

2. Producers will reduce the supply of oranges.

3. Supply curve shifts left from S1 to S2 (refer diagram)

4. Market equilibrium shifts from E1 to E2 (refer diagram)

5. Quantity supplied falls from QS2 to QS1 (refer diagram)

6. Price increases from P1 to P2 (refer diagram)

In what sense do consumers of oranges now "pay" for dealing with the spillover costs of pesticide production?

Orange consumers will bear the burden of now having to pay a higher price than they previously did.