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 D₂ and S₂ (point E). Which of the following changes would cause the equilibrium to change to point A? A)A positive change in the technology used to produce apples and a decrease in the price of oranges, a substitute for apples B)An increase in the wages of apple workers and a decrease in the price of oranges, a substitute for apples C)An increase in the number of apple producers and a decrease in the number of apple trees as a result of disease D)A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples

Question

Quizplus · Accepted Answer

According to the graph, if the wages of apple workers decrease, then the supply curve will shift to the right (from SS1U1B12S1U1B0 to SS1U1B12S1U1B1) since apple producers will now have less of a cost to produce apples. At the same time, if the price of oranges, a substitute for apples, increases, then the demand curve will shift to the left (from DS1U1B12S1U1B0 to DS1U1B11S1U1B0) since people will switch from buying apples to buying oranges. The new equilibrium point will be at the intersection of the new supply and demand curves, which is point A.

Figure 3.8 -Refer to Figure 3.8.The Graph in This Figure Illustrates an Figure