Quantity demanded and supplied , Managerial Economics

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a.  A major freeze destroys a large number of orange trees in Florida

Ans- Since the freeze destroyed a large number of orange trees in Florida the number of oranges the sellers can offer for sale would decrease.  Due to the reduced supply the price would rise. Other things being constant, quantity demanded would contract due to rise in price.

b.  The scientists in the agricultural extension service of the University of Florida discover a way to double the number of oranges produced by each orange tree.

Ans- The new technique would result in an increased supply of oranges. This would lower the price of oranges. Other things being constant, quantity demanded would rise due to fall in the price of oranges.

c.   The American Medical Association announces that drinking orange juice can reduce the risk of heart attack.

Ans- Due to this announcement made by the American Medical Institute more people would prefer to have orange juice to avoid the risk of heart attack. This would increase the demand for orange juice and thus will raise its price. Other things being equal higher the price, higher is the quantity supplied.

d.  The price of Florida grapefruit falls

Ans- The fall in price of grapefruit would on one hand result in a higher quantity demanded and on the other hand sellers would be less willing to offer a larger quantity for sale at reduced price. The sellers and buyers would negotiate a price at which they are fully satisfied and have no tendency to deviate from it. This will be the equilibrium price at which quantity demanded and supplied are equal.


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