A period of bad weather hurt the orange groves in Florida, from where many of the oranges grown for juice come from. Supplies of oranges dropped greatly because of the bad weather. What is the most likely effect on the price of orange juice?
a) Prices will drop because people will buy less orange juice.
b) Prices will stay the same because oranges and orange juice are not the same good.
c) Prices will rise because the orange market and the orange juice market are closely connected.
d) It is impossible to tell whether prices will change.
Is it c?
Prices for digital music files drop greatly. How is the demand for digital music players likely to change?
a) Demand will rise, because the demand for digital music files will rise.
b) Demand will rise, because the demand for digital music files will fall.
c) Demand will fall, because supplies of digital music files will drop.
d) Demand will fall, because demand of digital music files will rise.
Is it a?
I agree with both your answers.
For the first question, the correct answer is c) Prices will rise because the orange market and the orange juice market are closely connected. When supplies of oranges drop greatly due to bad weather, the shortage of oranges for juice production will result in an increase in demand for the limited supply of oranges, leading to higher prices for orange juice.
For the second question, the correct answer is b) Demand will rise, because the demand for digital music files will fall. If prices for digital music files drop greatly, it is likely that more people will download digital music files, which will increase the demand for digital music players since they are needed to play the downloaded files.
For both questions, to determine the correct answer, we need to understand the relationship between the two markets and analyze how changes in one market can affect the other.
In the first question about orange juice, we are told that the bad weather reduced the supply of oranges used to make orange juice. Based on this information, the most likely effect on the price of orange juice is that it will rise. This is because a decrease in the supply of oranges will lead to a decrease in the supply of orange juice, causing a shortage. When there is a shortage, prices tend to rise due to increased competition among buyers. Therefore, the correct answer is c) Prices will rise because the orange market and the orange juice market are closely connected.
In the second question about digital music players, we are told that prices for digital music files dropped greatly. To determine how this would affect the demand for digital music players, we need to consider the relationship between the two markets. In this case, the demand for digital music players is likely to rise because when the prices of complementary goods (music files) decrease, the demand for the related goods (music players) tends to increase. Lower prices for digital music files make owning a digital music player more appealing as consumers can enjoy their music at a lower cost. Therefore, the correct answer is a) Demand will rise because the demand for digital music files will rise.
So, your answers are correct. Well done!