On 19^(th) December, 2013, the following news item was printed in the Economic Times: "Household in Southern India prefer to eat organges for breakfast as banana plantations in Kerala have been destroyed and price of apples and grapes have also risen". Use a diagram and economic theory to analyse the impact of the rise in price of apples and grapes on the market of oranges.

On 19^(th) December, 2013, the following news item was printed in the

1.	On 19^(th) December, 2013, the following news item was printed in the Economic Times: "Household in Southern India prefer to eat organges for breakfast as banana plantations in Kerala have been destroyed and price of apples and grapes have also risen". Use a diagram and economic theory to analyse the impact of the rise in price of apples and grapes on the market of oranges.
Answer» SOLUTION : When the price of apples and grapes rises, consumers will substitute with these fruits with the relatively cheaper oranges. Thus, demand for oranges will increase and the demand curve SHIFTS rightwards to D'D'. At the prevailing market price (OP), there was an excess demand of AE. In this situation, buyers would REACT by competing with each other and raise the market price. As market price rises, quantity demanded of oranges contracts and the quantity supplied expands. This process will continued till a new equilibrium price is reached at `OP_(1)`, where market demand is equal to market demand is equal to market SUPPLY. `OP_(1)` is higher than the old price of oranges. Therefore, the equilibrium price of oranges increases and the equilibrium quantity also increases when the price of apples and grapes rises in Southern India.