instructions: include correctly labeled diagrams, if useful or required, in explaining your answers. a…

instructions: include correctly labeled diagrams, if useful or required, in explaining your answers. a correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. if the question prompts you to \calculate,\ you must show how you arrived at your final answer. assume the market for oranges in the united states is perfectly competitive. the market is currently in equilibrium. (a) draw a correctly labeled graph of the domestic market for oranges. label the equilibrium price as pe and the equilibrium quantity as qe. on your graph, identify the areas representing consumer surplus and producer surplus. (b) suppose a new harvesting technology is invented that makes it significantly cheaper to pick oranges. on your graph from part (a), show the effect of this new technology on the market. label the new equilibrium price as p2 and the new equilibrium quantity as q2.

instructions: include correctly labeled diagrams, if useful or required, in explaining your answers. a correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. if the question prompts you to \calculate,\ you must show how you arrived at your final answer. assume the market for oranges in the united states is perfectly competitive. the market is currently in equilibrium. (a) draw a correctly labeled graph of the domestic market for oranges. label the equilibrium price as pe and the equilibrium quantity as qe. on your graph, identify the areas representing consumer surplus and producer surplus. (b) suppose a new harvesting technology is invented that makes it significantly cheaper to pick oranges. on your graph from part (a), show the effect of this new technology on the market. label the new equilibrium price as p2 and the new equilibrium quantity as q2.

Answer

Explanation:

Step1: Draw the initial market graph

Draw a downward - sloping demand curve (D) and an upward - sloping supply curve (S). The intersection of D and S gives the equilibrium point. Label the equilibrium price as $P_E$ and the equilibrium quantity as $Q_E$. The consumer surplus (CS) is the area above the price line $P_E$ and below the demand curve D. The producer surplus (PS) is the area below the price line $P_E$ and above the supply curve S.

Step2: Analyze the impact of new technology

The new harvesting technology reduces the cost of production, which shifts the supply curve to the right from S to $S_1$. The new equilibrium is at the intersection of D and $S_1$. Label the new equilibrium price as $P_2$ (which is lower than $P_E$) and the new equilibrium quantity as $Q_2$ (which is higher than $Q_E$).

Answer:

(a) Graph: Draw a graph with the vertical axis labeled "Price" and the horizontal axis labeled "Quantity of Oranges". Draw a demand curve D and a supply curve S intersecting at a point. Label the equilibrium price on the vertical axis as $P_E$ and the equilibrium quantity on the horizontal axis as $Q_E$. Shade the area above $P_E$ and below D as consumer surplus and the area below $P_E$ and above S as producer surplus. (b) On the same graph, shift the supply curve S to the right to get $S_1$. The new intersection of D and $S_1$ gives the new equilibrium. Label the new price on the vertical axis as $P_2$ and the new quantity on the horizontal axis as $Q_2$.