(a) Consider the production of apple juice. If the supply of apple juice increased, did the marginal cost of
production of apple juice increase or decrease?

(b) Suppose that Sprite and Pepsi are substitutes in production. If the supply of Pepsi increased, did the
price of Sprite increase or decrease?

(c) Suppose that milk and beef are complements in production. If the supply of milk increased, did the
price of beef increase or decrease?

(d) Consider the market for orange juice. If the supply of orange juice stayed constant and the equilibrium
quantity exchanged of orange juice increased, did the demand for orange juice increase or decrease?
(e) Consider the market for grape juice. If the demand for grape juice stayed constant and the equilibrium
price of grape juice increased, did the supply of grape juice increase or decrease?

(f) Consider the market for Kool-Aid. If the demand for Kool-Aid increased and the supply for Kool-Aid
increased, did the equilibrium quantity exchanged increase or decrease?

Answer (a)

An increase in supply of apple juice means there's a decrease in the marginal cost of production.

Explanation: the marginal cost of production is the cost added by producing one additional unit of a product or service. Increasing supply spreads out the fixed cost of production, lowering the marginal cost of producing the next apple juice.

Answer (b)

B. An increase in the supply of Pepsi means there is an increase in price of sprite.

Explanation: increase in supply of Pepsi means there's a reduction in demand of sprite, which can be as a result of a price increase causing customers to shift towards the substitute.

Answer (c)

if the supply of milk increased, then there's a decrease in price of beef.

Explanation: since they are complement goods, an increase in supply of milk means that suppliers are supplying more milk due to an increasing demand of beef as a result of a reduction in the price of beef.

Answer (d)

If the supply of orange juice stayed constant and the equilibrium

quantity exchanged of orange juice increased, then the demand for orange juice increased.

Explanation: Equilibrium quantity is when there is no shortage or surplus of a product in the market. On a plot of demand and supply, the two will intersect at the equilibrium quantity. If the supply is held constant and the value of equilibrium quantity increases, then it means that the demand increased.

Answer (e)

If the demand for grape juice stayed constant and the equilibrium

price of grape juice increased, then the supply of grape juice decreased.

Answer (f)

If the demand for Kool-Aid increased and the supply for Kool-Aid

increased, then the equilibrium quantity exchange increases.

Explanation: since both demand and supply increased, then their point of intersection will increase since there'll be no surplus or lack.

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