Final answer:
The demand for orange juice is likely to fall if the demand for oranges falls, due to their direct relationship. However, the impact on the demand for apples or workers in orchards is not as straightforward; a slight decrease in demand for apples may occur depending on cross-price elasticity, which stands at -1.2% if the price of oranges falls by 3%.
Step-by-step explanation:
If the demand for oranges falls, it is highly likely that the demand for orange juice will fall. This is due to the direct relationship between the demand for a primary good and its derivatives. So, if fewer people want oranges, it makes sense that there will also be less demand for orange juice, which is made from oranges. However, this decrease in demand for oranges does not necessarily imply that the demand for orange grove workers, apple orchard workers, or apples themselves will change in the ways suggested.
Moving on to the related concept of cross-price elasticity, we can use this to analyze the likely impact on demand for other goods, such as apples, when the price of oranges changes. The cross-price elasticity measures the responsiveness of the quantity demanded for one good when the price of another good changes. If the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3%, we calculate the percentage change in demand for apples using this formula:
% change in Qd for apples = cross-price elasticity × % change in P of oranges
In this case, it would be 0.4 × (-3%) = -1.2%, which indicates a 1.2% decrease in demand for apples. Therefore, if demand for oranges falls, the demand for apples might not necessarily increase; it could experience a minor decrease based on the given elasticity value.
The substitution effect and income effect can also influence changes in demand when there's a price change. As per these effects, a decrease in the price of oranges due to reduced demand can lead to consumers substituting oranges for apples (substitution effect) and adjusting their consumption based on the change in their effective buying power (income effect).