Answer to Question #295829 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.”

Answer 1

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

country.” (2.5 Marks)

The orange crop is destroyed by the cold, resulting in a reduction in the availability of oranges. The new equilibrium price is higher than the prior equilibrium price.

b) “When the weather turns warm in New England every summer, the price of hotel rooms in Caribbean resorts plummet.” (2.5 Marks)

To escape the cold, many individuals go from New England to the Caribbean. As a result, there is a high demand for Caribbean hotels in the winter. Because northern conditions are more pleasant in the summer, there are fewer people visiting the Caribbean. In the demand curve, the demand curve moves to the left. As can be observed, the equilibrium price of Caribbean hotel rooms is lower in the summer as compared to winter.

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

Steel manufacturing will be reduced if steelworkers go on strike. As a result, there will be a decrease in steel supply on the market, raising the price. As prices rise, the amount demanded will eventually fall.

The graph below illustrates this:

d) “The price of station wagons rises.”

When the price of station wagons increases, the demand for them decreases, and its prices fall in the long run.

The graph shown illustrates this.