Answer to Question #295055 in Microeconomics for Magodi

Question

Explain each of the following statements using supply-and-demand diagrams.

a) “When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout the

country.” (2.5 Marks)

b) “When the weather turns warm in New England every summer, the price of hotel rooms in

Caribbean resorts plummets.” (2.5 Marks)

c) “A strike by steelworkers raises steel prices.” (2.5 Marks)

d) “The price of station wagons rises.” (2.5 Marks)

Answer 1

a) Cold reduces the production of Oranges causing the supply curve to shift from S1 to S2 as the quantity supplied reduces and the prices rises from 250 to 300.

b) When the weather is warm in New England, the demand for hotel rooms in the caribbean shifts from D1 to D2 and the price reduces from 250 to 150

c) A strike by the Steel workers reduces the production of steel thus reducing the quantity supplied. This is represented by a shift of the demand curve from S1 to S2 while the prices rises from 250 to 300

d) An increase in the prices of station wagons causes a decrease in the demand for them. This is represented by a shift of the demand curve from D1 to D2 and an decrease in prices from 250 to 150