To receive full credit, you must show the (a) correct graphical analysis on the axes provided, and (b) then restate how you perceive the market equilibrium price and quantity will be affected, as indicated in your graphics. You are not limited to one price, quantity axis — draw another if you need it.
SITUATION
CNN Today (8-16-04) stated that Florida orange growers were in a bind. The commentator stated that the Atkins low-carb diet craze was preventing the growers from realizing higher market prices (orange concentrate contains 9% carbohydrates compared to 3% for a slice of “lite” bread). Moreover that hurricane Charlie had destroyed a large proportion of the just-ripening crop. Using your knowledge about shifts in demand and supply, first diagram the effect of the diet craze on the demand for oranges (assuming Charlie posed no threat to demand). Next, impose Charlie’s effects on orange supply in a marketplace already under downward price pressure from the diet craze. Finally, explain in writing (using your graphical analysis for support), why the commentator might be wrong to insist that growers would not realize higher prices for the remaining crop.
