Question

Use supply and demand analysis to illustrate the likely effects of a hurricane in Florida on the equilibrium price and quantity in each of the following markets. a. the market for orange juice. (NB: The oranges grown in Florida are primarily used to make orange juice.) b. the market for plywood. (NB: Plywood is used to protect windows from the high winds associated with hurricanes.) c. the market for batteries. (NB: Hurricanes frequently know down power line, causing many people to be without electricity for days or weeks.) d. the market for admission tickets to theme parks in Orlando. (NB: Assume the hurricane causes heavy rain and wind throughout the Orlando area. Most of the attractions at these parks are outdoors.) e. tickets for airline travel from Florida during the few days before the hurricane makes landfall. (NB: Voluntary and mandatory evacuations are common when hurricanes threaten coastal areas.)

Answer 1

a) The market for orange juice: because of the hurricane, the crop would have been destroyed which would mean lesser supply of oranges which were used as a primary input in the orange juice. Hence this would mean a reduced supply of orange juice. The demand would be constant , so the equilibrium price would increase and the equilibrium quantity would reduce.

Supply curve shifts to left.

b) Market for plywood: The demand for plywood would increase as people would want to protect their homes from hurricane and the damage. This would shift the demand curve to right, causing the equilibrium price and quantity to rise.

Demand shifts to right.

c) The market of batteries: Since there are power cuts ,people would like to have backups which would increase the demand for batteries. This would shift the demand curve to right, which would imply higher equilibrium price and higher equilibrium quantity..

d) The market for admission tickets to theme parks: Most of the people would remain indoor, also the theme parks are generally open outdoor spaces , so the demand for the theme tickets would reduce, which would mean an reduce in equilibrium price and an reduce in equilibrium quantity.

Demand curve has shifted to left.

e) The airline tickets from Florida: The demand of air tickets would increase because people would like to shift to safer places. This would increase the demand , shifting the demand curve to right which would mean higher prices and higher equilibrium quantity.

Demand curve shifted to right.

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