l>EC 200 Practice troubles - Supply and also Demand

If the good is storable, and an increase in price is expected, consumer will desire to purchase the good today, prior to the price increases. Together a result, the current demand for the good increases, which results in rise in the price of the an excellent today. View graph.

2. The drought in the level states has made grain, and also therefore feed, fairly expensive. Countless ranchers can not afford to feed their cattle, and also have sold much of their herd for slaughter. A. What will be the immediate effect of this event on the equilibrium price and also quantity the beef? illustrate using a supply and demand diagram. Slaughtering the cows will an outcome in rise in the it is provided of beef to the market, i m sorry will in turn lead to a to decrease in the equilibrium price the beef and rise in the equilibrium amount of beef. View graph.

market for beef

b. Chicken and also beef room substitute goods. Illustrate the impact that the slaughter that the cattle herds will have on the equilibrium price and also quantity of chicken. together the price of beef decreases, consumers will buy an ext beef and also less chicken. The need for chicken will decrease, leading to a diminish in the equilibrium price and quantity the chicken. See graph.

industry for chicken c. Together it happens, the slaughter the beef cattle has synchronized with a decrease in consumers" income. Assuming the steak is a normal good while hamburgers are an inferior good, usage a supply-and-demand diagram because that either market to highlight the linked effect of the two previously mentioned events top top the equilibrium price and also quantity that hamburgers and steak. together consumers" earnings decreases, the need for normal products (such together steak) decreases if the demand for inferior items (such together hamburgers) increases. Keep in mind the our conclusion from component a is quiet valid. A lower price the beef will increase the it is provided of all products in i m sorry beef is an input. Because of this in every of the two industries in inquiry we address simultaneous shifts in supply and also demand.

Steak: S increases, D decreases.

You are watching: If people demand more of product a when the price of b falls, then a and b are:

Hamburgers: S increases, D increases.
The price of steak will decrease. We cannot speak for sure what will take place to quantity, due to the fact that that will rely on the relative magnitude of the two shifts. The equilibrium quantity of hamburgers marketed will increase. Us cannot to speak for sure what will occur to the equilibrium price that a hamburger, since that will rely on the relative magnitude the the two shifts.

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3. Assume that the industries for sugar cane, rum, and whiskey are initially in equilibrium. Assume more that Hurricane Marilyn destroys much of the Jamaican sugar cane crop. Street cane is a primary ingredient in rum, however it is no an ingredient in whiskey. Analyze the effect of the hurricane ~ above the markets for each of the 3 goods. Describe using graphs.

Step One - The market for sugar cane The Hurricane results in a diminish in supply (at any given price, sellers space no much longer able to carry out as much cane as they provided to). As a result, the equilibrium price of sugar cane will increase, and the equilibrium quantity will decrease. See graph.

Market for sugar cane

Step two - The industry for rum sugar cane is a major ingredient in rum, and also it is now an ext expensive. Rise in the price of inputs reasons a diminish in supply. As a result, the equilibrium price of rum will certainly increase, and the equilibrium amount will decrease. The graph will be comparable to the one above.

Step three - The industry for whiskey it is reasonable to i think whiskey and also rum space substitutes. Rum is now an ext expensive than it offered to be (see step Two). Together a result, much more consumers will buy whiskey instead. This will certainly cause rise in the need for whiskey, which leads to greater equilibrium price and quantity of whiskey. Watch graph. Market for whiskey