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    A supply and demand problem

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    If hurricanes destroy a large percentage of orange trees in Florida, the equilibrium price of oranges in California will ________________ because Florida and California oranges are _________________ and have a ________________ cross elasticity of demand.

    rise, substitutes, positive

    rise, substitutes, negative

    fall, substitutes, positive

    fall, complements, negative

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    Solution Preview

    So, easiest way to answer this question is using a demand/supply diagram. The explanation for the diagram can be found below, and the diagram itself is included in the attached Word document.

    You'll want to construct intersecting curves, with price on the vertical axis and quantity sold on the horizontal. The destruction of trees will reduce the available supply of Florida oranges at every price. This is typically referred to as a shift factor.

    The ...

    Solution Summary

    This solution looks at a problem related to the supply and demand of oranges in California and Florida following a hurricane in Florida that destroys a large number of trees.