Question

Explain 5 factors that could lead to a decrease in the price of apples (make sure to include graphs).

Answer 1

Here are five factors that could lead to a decrease in the price of apples:

1. Decrease in the production cost of apple: let' say there is a special type of fertiliser that is used in the production of apples. If the price of the fertiliser goes down then the marginal cost of producing apples will go down. hence the supply curve will shift towards the right and the price of the apples will go down.

2. Decrease in the consumer's income: if the income of the consumers of the apple goes down then they will have less purchasing power to buy apples and hence the demand for apple will go down and the demand curve will shift towards the left and the price of the apple will go down.

3. Decrease in the price of substitutes of apple: let's say people perceive apples as a substitute for banana. If the price of the bananas goes down people may choose a banana over apple and demand for the apple will go down and the price of apples will go down.

4. Increase in the price of complements: let's say people prefer to take an apple with peanut butter. if the price of the peanut butter goes up then people will bu less peanut butter and hence the demand for apple will also go down. hence the price of the apple will decrease.

5. Government imposing a price ceiling: If the government imposes a price ceiling such that the price is lower than the market price and the new price will be lower than the market-determined price for apples.

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