Question

Q13: Using a short, written paragraph that includes relevant economic terminology, explain why AND how the market is affected by the event(s). Be clear and as detailed as possible.

Illustrate each market before and after the event(s) using a single, properly-labelled demand and supply graph. Only one graph is necessary for part d).

Summarize the impacts of the event(s) on the market by completing the table at the end of the question. In each cell of the table, insert one of the following: none, increase, decrease, or unknown.

a) Market: Used clothing

Event: A recession occurs

b) Market: Beer in Colorado, Oregon and Washington

Event: Marijuana is legalized in Colorado, Oregon and Washington

c) Market: Ethanol

Event: The price of sugar declines

d) Market: Blueberries

Events: The price of sawdust increases AND

blueberries are recognized as a superfood

Part	Change in Demand	Change in Quantity Demanded	Change in Supply	Change in Quantity Supplied	Change in Equilibrium Price	Change in Equilibrium Quantity
a)
b)
c)
d)

Answer 1

(a) When the recession hits, the income of the people decreases which will lead to an increase in demand for used clothes shifting the demand curve for used clothes rightwards. This will lead to increased price in the market.

(b) If marijuana is legalized then the quantity demanded for the beer will fall as some people will tend towards marijuana. Ii will shift the demand curve to the left. Thus, decreasing the price of the beer.

(c) Sugar is an input in the production of Ethanol. So a decrease in price of sugar will lead to decrease in production cost. This will lead to a shift of the supply curve rightwards. Thus, decreasing the price of ethanol.

(d) Sawdust is used as an input in the production of blueberries. So, an increase in the price of sawdust will increase the cost of production shifting the supply curve to the left. If blueberries are recognized as superfood then the demand for blueberries will increase shifting the demand curve to the right.

Change in price and quantity will depend on the magnitude of change in the change in demand and supply.