Answer to Question #237977 in Macroeconomics for Sayu

Question

Suppose the priveof oranges increases and the quantity of oranges in the market decreases. Give two reasons why this might have happend

Answer 1

1) Demand: In the market for oranges, a decrease in supply leads to an increase in price of oranges. The movement from the original to the final equilibrium is due to increase in the demand for oranges as they become more scarce.

2) Transportation cost; Lack of good accessible roads hinder distribution of the oranges leading to an increase in the cost of transportation. This factor will leads to decrease in supply and automatic increase in price of oranges.