Answer to Question #277690 in Microeconomics for aman

Question

scientists reveal that consumption of oranges decreases the risk of diabetes and at the same time farmers uses a new fertiliser that makes orange tree more productive. state what effect this will have on equilibrium price and quantity

Answer 1

The revelation that the consumption of orange reduces the risk of diabetes at first will cause the demand to shift to the right, hence increasing the equilibrium price and quantity. On the other hand, orange trees have become more productive due to the use of new fertilizer by farmers, this increases the quantity supplied which might later reduce the price in the future due to excess supply