Question

A survey indicated that apple juice is Americans’ favorite drink. For each of the following, indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of apple juice.
a. A wild fire in NC that causes apple farmers to loose half of their trees. These farmers supply apples that is used to manufacture juice.
b. A new report by www.webmd.com reveals that apples do, in fact, have significant health benefits.
c. The discovery of cheaper synthetic apple flavoring lowers the price of generic apple juice.
d. New technology for picking and huicing apples lowers manufacturers’ costs of producing apple juice

Answer 1

A. Supply is reduced but there was no change in demand mentioned. Therefore, the price of the apples will increase affecting the price of the juice to be higher, since the quantity which can be produced is reduced.

B. Price can go up as Demand can go up as more customer will be considering to buy cheaper apple juice. This will affect the supply as the supply will go down to accomodate influx of buyers.

C. Quantity of apple juice will increase. Adding both made with natural ingredients and synthetic ingredients. Price will go down for both but will have bigger supply. Demand can go up as more customer will be considering to buy cheaper apple juice

D. Price reduction for the apple juice since the manufacturing cost is reduced. Demand can go up as more customer will be considering to buy cheaper apple juice