Supply and Demand (10 Marks) Draw a hypothetical demand and supply curves for egg cups in...

Supply and Demand

Draw a hypothetical demand and supply curves for egg cups in Canada, and then graph and explain the following events and how they affect the equilibrium price and quantity of egg cups in Canada.

A successful advertising campaign by egg cup producers.
Technological improvements in the production of egg cups.
An increase in the price of eggs a compliment in consumption.
An increase in the price of bird feed the main input in egg production.
An increase in the demand for waffles a substitute in consumption of eggs.

Solutions

Expert Solution

Sol :

Equilibrium is the point where Demand and supply are equal to each other.

a increase in demand for a waffles a substitute of egg cup means that price of substitute decreases. If substitute good is available at less prices , then demand for the egg cup will decreases. Then , it will shift the demand curve to the left.

A increase in prices of the bird feed a input , then it will increase the cost of production of egg cup. It will made the producer to reduce its profits. Due to less profits , producer will likely to decrease the supply. So , supply curve will shift to the left.

Due to increase in prices of complementary goods , there will decrease in the demand for the egg cup . As , due to decrease in demand , demand curve will shift to the left.

Technological improvement will lead to shift the supply curve as with the same resources more number of products can be produced. So, it will increase the supply.

Due to Successful advertising campaign by the producers. Demand for the egg cup will shift to the right as buyers in the market become aware and develop taste for the product. So , more buyer will likely to buy the product.

Rahul Sunny answered 1 month ago

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