Explain how an increase in demand and a subsequent decrease in supply affect the equilibrium price and quantity of lemons.

The extract states a "marked increase in demand for lemons" due to perceived health benefits during Covid-19. This is a non-price determinant of demand.

An increase in demand shifts the demand curve to the right.

With the supply curve remaining constant (ceteris paribus), a rightward shift in the demand curve leads to an increase in both the equilibrium price and the equilibrium quantity of lemons in the market.

Following the increase in demand, cold weather causes frost, leading to a poor lemon harvest. This is a non-price determinant of supply.

A poor harvest means a decrease in the supply of lemons, which shifts the supply curve to the left.

Starting from the new equilibrium after the demand increase (higher price and quantity), a leftward shift in the supply curve will further increase the equilibrium price. The effect on the equilibrium quantity is ambiguous; it could be higher or lower than the initial quantity before any shifts, depending on the relative magnitudes of the demand and supply shifts. However, it will be lower than the quantity achieved after only the demand shift.

A properly labeled diagram would show an initial equilibrium (P1, Q1). The demand curve would shift right to D2, establishing a new equilibrium (P2, Q2) where P2 > P1 and Q2 > Q1. Then, the supply curve would shift left to S2, resulting in a final equilibrium (P3, Q3) where P3 > P2. Q3 would be less than Q2, but its relationship to Q1 would depend on the size of the shifts.
(Note: I am unable to provide a diagram directly, but the explanation describes how it would be constructed.)

A Production Possibility Curve (PPC) is a graph that illustrates the variations in the amounts that can be produced of two products if both depend upon the same finite resources.

To construct the PPC, you would plot the combinations from the table on a graph. Apples would typically be on the y-axis and Pears on the x-axis (or vice-versa).

• Point A: (0 Pears, 100 Apples)
• Point B: (15 Pears, 80 Apples)
• Point C: (25 Pears, 60 Apples)
• Point D: (30 Pears, 40 Apples)
• Point E: (35 Pears, 20 Apples)
• Point F: (40 Pears, 0 Apples)

Connect these points with a smooth curve. This curve represents the PPC.
(Note: I am unable to provide a diagram directly, but the explanation describes how it would be constructed.)