📚 Learning Guide
Supply and Demand Analysis
easy

A new health study reveals that consuming oranges significantly boosts immunity, leading to increased consumer interest. Simultaneously, severe weather conditions have reduced orange crop yields, resulting in fewer oranges available in the market. How would these changes likely affect the market for oranges?

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Choose the Best Answer

A

Increased demand and decreased supply will raise the price of oranges.

B

Increased supply and decreased demand will lower the price of oranges.

C

Decreased demand and decreased supply will keep the price of oranges stable.

D

Increased demand with stable supply will lower the price of oranges.

Understanding the Answer

Let's break down why this is correct

Answer

The changes in the market for oranges would be influenced by both an increase in demand and a decrease in supply. As the health study shows that oranges can boost immunity, more people want to buy them, which raises demand. However, because severe weather has damaged orange crops, there are fewer oranges available for sale, which reduces supply. When demand goes up while supply goes down, prices typically rise because people are willing to pay more for the limited oranges available. For example, if normally a bag of oranges costs $3 but now there are fewer oranges due to the weather, stores might raise the price to $5 to reflect the higher demand and lower supply.

Detailed Explanation

When more people want oranges but there are fewer available, prices go up. Other options are incorrect because This option suggests that more oranges are available when demand is high, which is not true here; This option assumes that demand is low, but the study shows that demand is actually high.

Key Concepts

Supply and Demand
Market Equilibrium
Price Elasticity
Topic

Supply and Demand Analysis

Difficulty

easy level question

Cognitive Level

understand

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