Question

1. For each of the following scenarios, GRAPH how the supply and demand curve change. Indicate whether equilibrium price and quantity increase, decrease, or change ambiguously. (5 points)a. Market: Hot chocolate. Winter approaches and the weather grows colder. At the same time, hot chocolate producers have created a more efficient technology to harvest cocoa beans.b. Market: Swimming suits. The factory that produces swimming suits was flooded by Hurricane Cristóbal. Meanwhile, beaches open across the country.c. Market: Jumpsuits. Duchess Meghan Markle is seen wearing a jumpsuit to every event she attends. Meanwhile, factories in southeast Asia have doubled their labor force to produce dress clothes.d. Market: Airline tickets. The threat of Covid-19 has been found to be particularly high on airplanes. At the same time, steel, an input for airline production, has dropped significantly in price.e. Market: Turkeys. Thanksgiving is approaching. At the same time, the Surgeon General states that poultry consumption can reduce metabolism and cause excessive weight gain.

Answer 1

Market: Hot chocolate. Winter approaches and the weather grows colder. At the same time, hot chocolate producers have created a more efficient technology to harvest cocoa beans.

Demand increases. The demand curve shifts to the right due to change in tastes and preferences of the consumers.

Supply increases. The supply curve shifts to the right because of new technology.

If both demand and supply increase, there will be an increase in the equilibrium output, but the effect on price cannot be determined.

b. Market: Swimming suits. The factory that produces swimming suits was flooded by Hurricane Cristóbal. Meanwhile, beaches open across the country.

Supply will fall due to fall in the number of sellers in the market. The supply curve will shift to the left. Demand will increase as beaches open so the demand curve shift to the right. An increase in demand and a decrease in supply will cause an increase in equilibrium price, but the effect on equilibrium quantity cannot be determined.

c. Market: Jumpsuits. Duchess Meghan Markle is seen wearing a jumpsuit to every event she attends. Meanwhile, factories in southeast Asia have doubled their labor force to produce dress clothes.

Demand increases and supply falls. Demand curve shifts to the right and supply curve shifts to the left. An increase in demand and a decrease in supply will cause an increase in equilibrium price, but the effect on equilibrium quantity cannot be determined.

d) Market: Airline tickets. The threat of Covid-19 has been found to be particularly high on airplanes. At the same time, steel, an input for airline production, has dropped significantly in price.

Demand falls due to Covid-19, so demand curve shifts to the left. Supply increases due to low price of steel, so supply curve shifts to the right.

A decrease in demand and an increase in supply will cause a fall in equilibrium price, but the effect on equilibrium quantity cannot be determined.

e. Market: Turkeys. Thanksgiving is approaching. At the same time, the Surgeon General states that poultry consumption can reduce metabolism and cause excessive weight gain.

Supply increases and demand falls.