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Essentials of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091992

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BuyFindarrow_forward

Essentials of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091992
Chapter 4, Problem 9PA
Textbook Problem
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Consider the following events: Scientists reveal that eating oranges decreases the risk of diabetes, and at the same time, fanners use a new fertilizer that makes orange trees produce more oranges. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.

To determine

Change in price of related goods and its inter-related effects in the market.

Explanation of Solution

The news of the increased health benefits (decrease in risk of diabetes) from consumption of oranges will have a positive effect and will increase the demand for oranges. As a result of this increase in demand curve, both the equilibrium price and quantity of oranges increases.

Likewise, if farmers use a new fertilizer that makes orange trees more productive, the supply of oranges will increase...

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