Suppose the market for frozen orange juice is in equilibrium at a price of $2.00 per can and a quantity of 4200 cans per month. Now suppose that at a price of $3.00 per can, quantity demanded falls to 3000 cans per month and quantity supplied increases to 4500 cans per month.
a. Draw the appropriate diagram for this market.
b. Calculate the price elasticity of demand for frozen orange juice between the prices of $2.00 and $3.00. Is the demand elastic or inelastic?
c. Calculate the elasticity of supply for frozen orange juice between the prices of $2.00 and $3.00. Is the supply elastic or inelastic?
d. Explain in general what factors would affect the elasticity of demand for frozen orange juice.
e. Explain in general what factors would affect the elasticity of supply of frozen orange juice.