Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 38

Marshall's model pictures price and quantity as being determined simultaneously by the interaction of supply and demand. Using this insight, explain the fallacies in the following paragraph: A rise in the price of oranges reduces the number of people who want to buy. This reduction by itself reduces growers' costs by allowing them to use only their best trees. Price, therefore, declines along with costs, and the initial price rise cannot be sustained.