A freeze in Florida devastates the orange crop at the same time a new study is released showing the health benefits of vitamin C (leading consumers to want to buy more orange juice). How will the equilibrium price and quantity of orange juice change in response to the combination of these two events?

Question

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The freeze in Florida will decrease the supply of oranges, leading to a higher cost of producing orange juice, resulting in an increased equilibrium price. The new study on the health benefits of vitamin C will increase demand for orange juice, causing an increase in the equilibrium quantity. The net effect is that equilibrium price will increase while the effect on quantity is ambiguous.

A Freeze in Florida Devastates the Orange Crop at the Same