Question

An unexpected frost in the orange groves of California would causea. a decrease in the supply of orange juice, increasing the equilibrium priceb. an increase in the demand for orange juice, increasing the equilibriumc. a decrease in the demand for orange juice, decreasing the equilibrium priced. an increase in the supply of orange juice, decreasing the equilibrium price

Answer 1

The correct answer is option a.

Step-by-step explanation:

Unfavorable weather in the orange groves of California will adversely affect the production of oranges. This will cause a reduction in the supply of oranges. As a result, the price of oranges will decline.

Now, these oranges are used as input in making orange juice. The increase in input price will lead to an increase in the cost of production. This will further lead to a decrease in the supply of orange juice. Consequently, the equilibrium price of orange juice will increase.