suppose that many cities begin to pass taxes on carbonated sodas, while at the same time scientists discover…

suppose that many cities begin to pass taxes on carbonated sodas, while at the same time scientists discover a cure for citrus greening, which is reducing orange crops in florida and brazil.\na. can we use this information to be certain whether the equilibrium price of orange juice will increase or decrease?\nb. can we use this information to be certain whether the equilibrium quantity of orange juice will increase or decrease?\nuse a demand and supply graph to illustrate your answers to the questions above.\n1. using the line drawing tool, graph the effect of a tax on carbonated sodas in the market for orange juice by drawing a new demand curve. label your line d₂.\n2. using the line drawing tool, graph the effect of a cure for citrus greening in the market for orange juice by drawing a new supply curve. label your line s₂.\n3. using the point drawing tool, indicate the new market equilibrium. label your point e₂.\ncarefully follow the instructions above and only draw the required objects.

suppose that many cities begin to pass taxes on carbonated sodas, while at the same time scientists discover a cure for citrus greening, which is reducing orange crops in florida and brazil.\na. can we use this information to be certain whether the equilibrium price of orange juice will increase or decrease?\nb. can we use this information to be certain whether the equilibrium quantity of orange juice will increase or decrease?\nuse a demand and supply graph to illustrate your answers to the questions above.\n1. using the line drawing tool, graph the effect of a tax on carbonated sodas in the market for orange juice by drawing a new demand curve. label your line d₂.\n2. using the line drawing tool, graph the effect of a cure for citrus greening in the market for orange juice by drawing a new supply curve. label your line s₂.\n3. using the point drawing tool, indicate the new market equilibrium. label your point e₂.\ncarefully follow the instructions above and only draw the required objects.

Answer

Explanation:

Step1: Analyze demand - effect of tax on carbonated sodas

Carbonated sodas and orange - juice are substitutes. A tax on carbonated sodas will increase their price, causing consumers to shift to orange - juice. So, the demand for orange - juice will increase, and the demand curve $D_1$ will shift to the right to $D_2$.

Step2: Analyze supply - effect of cure for citrus greening

A cure for citrus greening will increase the orange crops. This will increase the supply of orange - juice, and the supply curve $S_1$ will shift to the right to $S_2$.

Step3: Analyze equilibrium price

The right - ward shift of the demand curve ($D_1$ to $D_2$) and the right - ward shift of the supply curve ($S_1$ to $S_2$) both tend to increase the equilibrium quantity. However, the effect on the equilibrium price depends on the magnitudes of the shifts. If the increase in supply is larger than the increase in demand, the equilibrium price will decrease. If the increase in demand is larger than the increase in supply, the equilibrium price will increase. So, we cannot be certain whether the equilibrium price of orange - juice will increase or decrease.

Step4: Analyze equilibrium quantity

Since both the demand and supply curves shift to the right, the equilibrium quantity of orange - juice will definitely increase.

Step5: Graphical representation

  1. Draw a new demand curve $D_2$ to the right of $D_1$.
  2. Draw a new supply curve $S_2$ to the right of $S_1$.
  3. The intersection of $D_2$ and $S_2$ is the new equilibrium point $e_2$.

Answer:

a. No. b. Yes, the equilibrium quantity of orange - juice will increase. (For the graph: Draw a right - shifted $D_2$ curve, a right - shifted $S_2$ curve and mark the new equilibrium point $e_2$)