Full Answer Section

A supply curve will shift to the right if there is an increase in any of the determinants of supply. For example, if the price of inputs decreases, the cost of production will decrease, and producers will be willing to supply more of the commodity. This will cause the supply curve to shift to the right.

Here are two demand-related and two supply-related reasons why the equilibrium price of orange juice could fall to $7.00 per gallon:

• Demand-related reasons:
  • A decrease in the number of consumers who drink orange juice.
  • An increase in the number of substitutes for orange juice.
• Supply-related reasons:
  • An increase in the supply of orange juice due to technological improvements.
  • A decrease in the cost of producing orange juice due to a decrease in the price of inputs.

If both producers and consumers believe that prices will rise in the near future, they will both start to act as if prices have already risen. Producers will start to produce more orange juice, and consumers will start to buy less orange juice. This will cause the supply of orange juice to increase and the demand for orange juice to decrease. As a result, the equilibrium price of orange juice will fall.

If the government offers price supports to citrus producers, the government will essentially guarantee citrus producers a minimum price for their oranges. This will cause the supply curve for oranges to shift to the right. As a result, the equilibrium price of oranges will rise. The consumers who buy oranges will lose because they will have to pay more for oranges. The citrus producers will gain because they will receive a higher price for their oranges.

It is unfair or meaningless to criticize a theory as “unrealistic” because all theories are simplifications of reality. No theory can perfectly predict what will happen in the real world. However, theories can be very useful for understanding how the world works and for making predictions about what might happen in the future.

For example, the theory of supply and demand is a very useful theory for understanding how markets work. The theory does not perfectly predict what will happen in the real world, but it can give us a good understanding of the factors that affect prices and quantities in markets.

If we criticize a theory as “unrealistic,” we are essentially saying that the theory is not useful. However, even if a theory is not perfect, it can still be useful for understanding the world and for making predictions.