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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

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

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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