Predictions Using Supply and Demand Analysis
Exploration: Your task is to predict how various events in the apple growing market will affect equilibrium price of apples and equilibrium quantity of apples sold.

This interactive graph illustrates how changes in market demand and supply can create excess demand or excess supply resulting in a new equilibrium price and quantity in the market. Consider the market for apples. For each of the following predict the impact on either the demand or supply of apples and then the impact on the market price and quantity of apples traded.

1. What would happen in the apple market if apple growers experience an increase in fertilizer costs?
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2. What would happen in the apple market if a new high-tech apple-picking machine significantly reduces costs to apple growers?
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3. What would happen in the apple market if the price of pears, a substitute for apples, falls?
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4. What would happen in the apple market if the Surgeon General reports credible new medical research leads more people to believe the adage: "An apple a day will keep the doctor away."?
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5. Experiment on your own. What general principles govern the workings of any market? What conclusions can you arrive at concerning the impact of changes in demand and supply in creating excess demand or excess supply and therefore causing changes in the equilibrium price and quantity in a market?
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