Question

A hurricane in Florida destroys half of the orange crop. Illustrate the effect this has on the market for oranges. Demand Supply Price of Oranges Quantity of Oranges Demand Supply Consumer surplus in the market for oranges . Illustrate the effect the price change of oranges has on the market for orange juice. Demand Supply Price of Orange Juice Quantity of Orange Juice Demand Supply Consumer surplus in the market for orange juice . Continue without saving

Answer 1

Answer:

As a result of half the orange crop being destroyed, there will be a shortage in the supply of oranges. This will shift the supply curve for oranges to the left as shown in the graphic.

Notice that the equilibrium price becomes higher. As a result of this, the Consumer surplus will decrease because they are now paying more than they would like to pay.

The situation will largely be the same in the market for orange juice because orange is the main component for orange juice. Orange juice supply will decrease and the supply curve will shift left.

Prices will rise and Consumer surplus will decrease.

Note: Second graph x-axis is Quantity of orange juice.