Question

According to an article in the Wall Street Journal, the demand for orange juice is declining in the United States "as newer entrants in the beverage aisle, including more-exotic fruit juices, such as pomegranate, energy drinks and ready-to-drink coffee, have grabbed a greater share of the market." At the same time, orange juice production has been declining as bacterial infections reduce the quantity of fruit that orange trees can produce. The article notes that despite the decline in the demand for orange juice, the price of orange juice might increase Market for Orange Juice Source: Alexandra Wexler, "U.S. OrangeJuice Sales Fall to Record Low," Wall Street Journal, August 18, 2014 On the graph to the right, assuming that the initial point is 'A', move the cursor to illustrate how the price of orange juice might also increase as a result of these events Given the scenario described in the article, the price of orange juice could increase if 0

A, demand decreased less than the supply decreased uantity
B. demand increased less than the supply decreased
C. demand decreased more than the supply decreased 0
D. demand increased more than the supply decreased

Answer 1

The answer is: C) Demand decreased more than the supply decreased

Step-by-step explanation:

The price of a product will increase if its demand increases or its supply decreases. Instead its price will decrease if the opposite happens.

In this scenario demand for orange juice is decreasing, so if everything else remained the same, the price should decrease. But since the pace the orange juice supply is decreasing (due to bacterial infections in orange trees) is higher than the decrease in the demand of the product, the price will increase.