Question

An unexpected frost in the orange groves of California would cause A. an increase in the supply of orange​ juice, decreasing the equilibrium price. B. a decrease in the demand for orange​ juice, decreasing the equilibrium price. C. an increase in the demand for orange​ juice, increasing the equilibrium price. D. a decrease in the supply of orange​ juice, increasing the equilibrium price.

Answer 1

Answer:

The correct answer is option D.

Explanation:

Unfavorable weather conditions in the orange groves would lead to a decrease in the supply of oranges. This will lea to an increase in the price of oranges. Since oranges are used as input in making orange juice the cost of producing juice will increase.

As a result, the supply of orange juice will decrease. This will lead to a leftward shift in the supply curve. This leftward shift in the supply curve will cause the equilibrium price to increase.