Question

2. [5 pts] 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. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.

Answer 1

Answer:

there would be a rise in equilibrium quantity and an indeterminate effect on equilibrium price

Explanation:

as a result of the scientists revelation, the demand for oranges would increase and so would the price.

as a result of the new fertilisers been used, the supply of oranges would rise and price would fall.

taking these two occurrences together, there would be a rise in equilibrium quantity and an indeterminate effect on equilibrium price