Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change? A) The equilibrium point will move from A to E. B) The equilibrium point will move from A to B. C) The equilibrium point will move from A to C. D) The equilibrium will first move from A to B, then return to A.

Question

Quizplus · Accepted Answer

The decrease in the price of oranges, a substitute for apples, will shift the demand curve for apples to the right (D₂). The increase in the wages of apple workers will shift the supply curve for apples to the left (S₂). The new equilibrium point will be at the intersection of D₂ and S₂ (point E), where the quantity of apples demanded is greater than at point A and the price of apples is higher than at point A.