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Figure: Supply and Demand in the Orange Juice Market
-(Figure: Supply and Demand in the Orange Juice Market) Look at the figure Supply and Demand in the Orange Juice Market. The market is in equilibrium at point C. Suppose most people drink orange juice only with champagne. What will be the new equilibrium point in the orange juice market if a law banning alcohol passes?
A)A
B)B
C)D

Question

Use the following to answer questions :
Figure: Supply and Demand in the Orange Juice Market 
-(Figure: Supply and Demand in the Orange Juice Market) Look at the figure Supply and Demand in the Orange Juice Market. The market is in equilibrium at point C. Suppose most people drink orange juice only with champagne. What will be the new equilibrium point in the orange juice market if a law banning alcohol passes?
A)A 
B)B 
C)D

Quizplus · Accepted Answer

If a law banning alcohol passes, the demand for orange juice will decrease because it is a complementary good to champagne. This shift in demand will move the equilibrium from point C to point D, where the new lower demand curve intersects the supply curve.

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