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

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.

Quizplus · Accepted Answer

The decrease in the price of oranges will decrease the demand for apples (shift from D₁ to D₂), and the increase in wages will decrease the supply of apples (shift from S₁ to S₂), moving the equilibrium from A to E.

Figure 3.8 -Refer to Figure 3.8. the Graph in This Figure Illustrates