Answer to Question #162112 in Microeconomics for Nischay

Question

Scientists have revealed that the consumption of oranges reduces the risk of diabetes and at the same time the government has banned the use of fertilizers in the orange farming resulting into loss of productivity. What happens to the equilibrium quantity of oranges?

a) Increases

b) Decreases

c) Remains Constant

d) All the above are possible

Answer 1

Decreases

Since the government banned the use of fertilizers, the output of the oranges will be low, this will make the supply of oranges to the market to decrease and the price will increase since the demand for oranges is high. This makes the equilibrium quantity of oranges to decrease.