We are currently in equilibrium in the apple market. During the few years, there is a large increase in the price of irrigation water. Answer the following questions in your own words.
(a) What would happen to the supply of apples? Explain your reasoning.
(b) What change would your answer in (a) above physically do to the supply of apples: shift inward to the left, shift outward to the right, or stay in the same position?
(c) What would happen to the demand for apples? Explain your reasoning.
(d) What change would your answer in (c) above physically do to the demand for apples: shift inward to the left, shift outward to the right, or stay in the same position?
(e) Based on your answers above, what would happen to the Equilibrium Price of apples: Increase, Decrease, or Stay the Same?
(f) Based on your answers above, what would happen to the Equilibrium Quantity of apples: Increase, Decrease, or Stay the Same?
(g) Assuming that change in the equilibrium price of apples described in (e) above is a 40% change and given that the Price Elasticity of Demand (Ed) is 0.80 and the Price Elasticity of Supply (Es) is 0,90, determine the percentage change in the equilibrium quantity of apples described in (f) above. Using the Elasticity Definition Formula covered in the lecture, show how you got your answer