Answer to Question #131628 in Microeconomics for hammad

Question

Assuming hypothetical equilibrium in Demand/Supply Model of Apples, illustrate impact of following events:

A. Suppose the Doctors recommend eating Apples every morning. (0.5 Marks)

B. The Monsoon rains adversely affect the Apple Harvest. (0.5 Marks)

C. The government announces increase in Wages of workers. (0.5 Marks)

D. The price of petrol in the market comes down. (0.5 Marks)

E. Consumers Income falls during government imposed Lockdowns due to health concerns. (0.5 Marks)

Answer 1

A.Doctors recommend people to eat apples every morning;this will result to an increase in the demand for apples causing the equilibrium price for apples will rise.

B. The monsoon rains adversely affect the Apple Harvest ;this will result to a reduction in supply of apples due to the low harvest causing the equilibrium price for apples will rise.

C. The government announces increase in wages of workers;this will lead to an increase in the demand for apples due to the increase in the income leading to an increase in the equilibrium price of Apples.

D. When the price of petrol in the market comes down;this will lead to an increase in supply for apples since the transportation of Apples to the market will be cheaper causing the equilibrium price of apples in the market to fall.

E. Consumers Income falls during government imposed Lockdowns due to health concerns;this will lead to a decrease in the demand for apples due to the low income leading to a fall in the equilibrium price of Apples.