The surgeon general is considered an important figure in the health care sector. Any update from his office is of national importance. Regarding that we find he has declared that inclusion of apples in diet would reduce the risk of cancer. As soon as the declaration reaches the consumers, they would frantically consume apples in their diet. Consumer who otherwise did not consume apples would now consume it because they are aware that cancer can be avoided with just consumption of a fruit (Fine, 2016). This would increase the demand of apples in the apples market to a great extent. However the supply of apples which was happening at a given rate does not change because supply is highly inelastic in short span of time. This would lead to a shortage in the market as supply cannot match the huge quantity demanded at the given price. The market is now flooded with new consumers.
Figure 1 Shift in Demand curve
Source: (Farnham, 2014)
Since the price have not changed but the cumulative quantity demanded have changed due to larger number of consumers, the demand curve would shift. The supply curve is not changed but demand would change. The demand curve would shift to the right causing a rise the price of apples. Now the supply matches the demand but at a higher price. Price increases would eliminate those who cannot afford to buy. They would exit the market and equilibrium would be achieved. In this diagram, we find that when the demand curve has shifted to D1 from D0, this is the case, of higher numbers of consumers wanting to consume apples. This has led to rise in price to P1.
References
Fine, B. (2016). Microeconomics. University of Chicago Press Economics Books.
Samuelson, W. F., Marks, S. G., & Zagorsky, J. L. (2021). Managerial economics. John Wiley & Sons.
Farnham, P. (2014). Economics for Managers, Global Edition (3rd ed.). Pearson.
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