• 2.2.

Marshall defined an equilibrium price as one at which the quantity demanded equals the quantity supplied.

Using the data provided in Problem 1.1, show that is the equilibrium price in the orange juice market.

Using these data, explain why and are not equilibrium prices.

Graph your results and show that the supply-demand equilibrium resembles those you encountered in introductory economics.

Suppose the demand for orange juice were to increase so that people want to buy 300 million more gallons at every price. How would that change the data? How would it shift the demand curve you drew in part c?

What is the new equilibrium price in the orange juice market, given this increase in demand? Show this new equilibrium in your supply-demand graph.

Suppose now that a freeze in Florida reduces orange juice supply by 300 million gallons at every price listed. How would this shift in supply affect the data? How would it affect the algebraic supply curve calculated?

Given this new supply relationship together with the original demand relationship, what is the equilibrium price in this market?

Explain why is no longer an equilibrium in the orange juice market. How would the participants in this market know is no longer an equilibrium?

Graph your results for this supply shift.