Illustrating graphically and specifically the assumptions upon which your reason is based describe briefly the effects on the price and output of oranges of an increase in consumers income
To illustrate the effects of an increase in consumers' income on the price and output of oranges graphically, we can use the demand and supply model.
In the demand and supply model, price is on the vertical axis and quantity is on the horizontal axis. The demand curve, which represents consumers' willingness and ability to purchase oranges at different prices, slopes downward from left to right. The supply curve, which represents producers' willingness and ability to sell oranges at different prices, slopes upward from left to right.
Assumption 1: Income Effect
Assuming that oranges are a normal good, when consumers' income increases, their ability to afford oranges improves. This leads to an upward shift in the demand curve, indicating an increase in the quantity of oranges demanded at every price level. This can be represented graphically as a rightward shift of the demand curve.
Assumption 2: No Change in Supply
Assuming no change in the supply of oranges, the supply curve remains constant. This implies that producers have the same willingness and ability to sell oranges at different prices.
Effect on Price:
With an increase in consumers' income, the demand for oranges rises. This upward shift in demand leads to a new equilibrium point where the demand curve intersects with the supply curve at a higher quantity and price level. As a result, the price of oranges is likely to increase due to the increased demand.
Effect on Output:
Since the supply curve remains constant, there is no direct effect on the output of oranges. However, the increase in demand may incentivize producers to increase their production in the long run, aiming to meet the higher consumer demand and take advantage of the higher prices.
In summary, an increase in consumers' income would generally lead to higher prices and potentially higher output of oranges, assuming no changes in supply other than the typical response of producers to market signals. The graphical representation of this scenario would show a rightward shift of the demand curve, resulting in a new equilibrium point at a higher price level and quantity.