Suppose that a new advertising campaign extolling the virtues of apple juice is successful,and a major freeze destroys half of the country's apple crop.What happens to the price and quantity of apple juice?

Question

Quizplus · Accepted Answer

With a successful advertising campaign, demand for apple juice increases. However, with the decrease in supply due to the crop freeze, the equilibrium price of apple juice rises. The equilibrium quantity of apple juice may rise or fall, as it depends on the magnitude of the increase in price and the responsiveness of demand. Nevertheless, the increase in price will likely lead to a decrease in quantity demanded by some consumers. Therefore, the most likely outcome is a rise in equilibrium price and a decrease in equilibrium quantity.

Suppose That a New Advertising Campaign Extolling the Virtues of Apple