Answer to Question #308157 in Microeconomics for Usman ali

Question

Q-1. 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.”

b. “When the weather turns warm in New England every summer, the price of hotel rooms in Caribbean resorts plummets.”

c. “When a war breaks out in the Middle East, the price of gasoline rises and the price of a used Cadillac falls.”

Answer 1

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

Crops are devastated and the supply of oranges is reduced when a cold snap hits Florida. The supply of orange juice shifts to the left because oranges are used to make orange juice, as indicated below. As a result, the price rises while the quantity decreases.

b. “When the weather turns warm in New England every summer, the price of hotel rooms in Caribbean resorts plummets.”

The demand for hotel rooms in the Caribbean decreases as the weather warms. As a result, the demand curve shifts to the left, and the price drops. This is shown below:

c. “When a war breaks out in the Middle East, the price of gasoline rises and the price of a used Cadillac falls.”

If a war breaks out in the Middle East, oil supplies will be reduced. Gasoline supply shifts to the left, and prices rise. People prefer public transportation as gasoline becomes more expensive. Cadillac's demand is decreasing, and the price is dropping.

This is shown in the pics below: