Orange juice and apple juice are substitutes.Suppose bad weather sharply reduced the orange harvest.What would the impact be
A)increase consumer surplus in the market for orange juice but decrease producer surplus in the market for apple juice
B)increase consumer surplus in the market for orange juice and increase producer surplus in the market for apple juice
C)decrease consumer surplus in the market for orange juice but increase producer surplus in the market for apple juice
D)decrease consumer surplus in the market for orange juice and decrease producer surplus in the market for apple juice

Question

Quizplus · Accepted Answer

If bad weather sharply reduces the orange harvest, the supply curve for orange juice will shift to the left, resulting in an increase in the equilibrium price of orange juice. As a result, consumers will reduce their purchases of orange juice, and their surplus will decrease. But since orange juice and apple juice are substitutes, the demand for apple juice will increase, leading to an increase in the equilibrium price and quantity of apple juice. This increase in demand for apple juice will result in an increase in the producer surplus in the market for apple juice. Therefore, the correct option is (C) decrease consumer surplus in the market for orange juice but increase producer surplus in the market for apple juice.

Orange Juice and Apple Juice Are Substitutes