The word limit is 1250 (10% up or down)
The article is given.
Answer each question separately – there is no need for an introduction or conclusion.
1. Using demand and supply model, explain and illustrate why Australian Juice Companies are being forced to use imported oranges in the production of orange juice and how will this impact their final market price and quantity sold for orange juice?
Hint: Make sure you discuss the equilibrating process, and clearly outline the effect on price and quantity for both oranges and orange juice. Use two graphs to illustrate this.
2. a. Use the determinants of price elasticity of demand to analyse whether the demand for orange juice to be price elastic or inelastic.
b. Based on your answer to Q2(a), explain what effect you would expect the price rise to have on the total revenue of the orange juice producers. Illustrate your conclusion using an appropriate economic model.
3. Imagine the government was to implement a $1.00 sales tax per bottle of juice sold. Based on your answer to Q2(a), explain who will bear most of the incidence of the ‘sales tax’, and illustrate your conclusion using an appropriate economic model.
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