Prices communicate information about the relative value of resources in the marketplace. Which of the following would cause the marginal value and, hence, the price, of oranges to rise?

Question

a. A freeze wipes out half of the Florida citrus groves.
b. Orange juice is shown to reduce blood cholesterol levels.
c. The price of grape, cranberry, and pineapple juice falls dramatically.

Answer 1

a. and b. would result in higher orange prices. The freeze in some orange groves would cause the price of the remaining oranges to increase. A stronger preference for orange juice would likely result once the cholesterol-reducing health benefits of orange juice become known, increasing the price of orange juice. A reduction in the price of substitute juices would decrease the price of oranges (as consumers switch to alternative fruit sources).