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Supply and Demand with Graphical Illustrations

Florida Citrus Mutual, an agricultural cooperative association for citrus growers in Florida, needs to predict what will happen to the price and output of Florida oranges under the conditions below. What are your predictions? For each part, sketch a graph showing the appropriate demand and supply analysis.

a. A major freeze destroys a large number of the orange trees in Florida.

b. The scientists in the agricultural extension service of the University of Florida discover a way to double the number of oranges produced by each orange tree.

c. The American Medical Association announces that drinking orange juice can reduce the risk of heart attack.

d. The price of Florida grape fruit falls.

Rising jet fuel prices recently led most major U.S. airlines to raise fares by approximately 15 percent. Explain how this substantial increase in airfares would affect the following:

a. The demand for air travel.
b. The demand for hotels.
c. The demand for rental cars.
d. The supply of over-night mail.

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Solution Preview

a. A major freeze destroys a large number of orange trees in Florida.
Answer: There will be a reduction in the output of oranges due to the destruction of the fruit bearing trees. This will result to the increase in the price of oranges. (Please see the attached file for a detailed illustration.)

b. The scientists in the agricultural ...

Solution Summary

This solution explains the operation of supply and demand in 231 words with a graphical illustration that shows the movement of the supply and demand curve attached.