Assume that apples are an inferior good. Draw a perfectly competitive market for apples and a firm
selling apples in the long run equilibrium where price is $10 and the firm’s equilibrium quantity is 50.
Explain the following situations graphically and in words (Draw and label side-by-side graphs for
each).
a. GRAPH & EXPLAIN what happens in the short-run if incomes increases by 15%.
b. GRAPH & EXPLAIN the process by which this market returns to the long-run equilibrium.
c. GRAPH & EXPLAIN what happens in the short-run if the price of oranges increase.
d. GRAPH & EXPLAIN the process by which this market returns to the long-run equilibrium.