Question

1. Consider households’ demand for chicken. For each of the events listed below, state and explain the likely effect on the demand for chicken.
   1. A medical study reports that eating chicken reduces the likelihood of suffering from particular types of heart problems.
   2. Average household income increases.
   3. A widespread disease leading to an increase in the price of beef

2. Consider the world supply of cocoa beans, the main input in the production of chocolate. For each of the events listed below state and explain the likely effect on the supply of cocoa beans
   1. Wages for farm labor in cocoa-growing regions rises.
   2. Farmers in various parts of the world see profits being earned by cocoa farmers and choose to enter this industry.
   3. A dramatic rise in the world price of coffee beans. Assume that farmers growing cocoa beans can easily grow coffee bean instead.

3. The following supply and demand schedules describe a hypothetical Canadian market for potash.

Price ($ per tonne)	Quantity Supplied (million tonnes)	Quantity Demanded (million tonnes)
280	8.5	12.5
300	9.0	11.0
320	9.5	9.5
340	10.0	8.0
360	10.5	6.5
380	11.0	5.0

1. What is the equilibrium price of potash?
2. How much potash would actually be purchased if the price were $280 per tonne?
3. How much potash would actually be sold if the price were $360 per tonne?
4. At a price of $280 per tonne, is there excess supply or demand? If so, how much?
5. At a price of $360 per tonne, is there excess supply or demand? If so, how much?

4. The demand and supply schedules for potato chips are provided in the table below:

Price (cents per bag)	50	60	70	80	90	100
Quantity Demanded (million bags per week)	160	150	140	130	120	110
Quantity Supplied (million bags per week)	120	130	140	150	160	170

1. Draw a graph of the potato chip market showing the market demand curve (D0) and the market supply curve (S0). Plot the two end points to draw this curve and denote the equilibrium price and quantity as point A.
2. If the price is 60 cents a bag, is there a shortage or a surplus, and how does the price adjust?

A new flavour is available, and it increases the quantity of potato chips that people want to buy by 30 million bags per week at each price, how does the demand of potato chips change? Show the new demand curve on the graph you constructed in part a and label the new demand curve as D1.

3. What will be the new equilibrium price and quantity of potato chips after the introduction of the new flavour? Denote the equilibrium price and quantity as point B on your graph.

If a virus destroys potato crops and the quantity of potato chips produced decreases by 40 million bags a week at each price, how does the supply of potato chips change? Show the new supply curve on the graph you constructed in part a and label the new supply curve as S2.

4. What will be the new equilibrium price and quantity of potato chips with the unfortunate spread of the virus? Denote the equilibrium price and quantity as point C on your graph.
5. If the independent events of the introduction of the new flavour and the unfortunate spread of the virus happen to occur concurrently, what will be the equilibrium price and quantity? Denote this equilibrium as point D on your graph.

5. Find the equilibrium price and quantity for each of the following pairs of demand and supply functions and accurately plot the equilibrium, x intercept, and y intercept.

a.     Qd = 10 – 2p                                            Qs = 5 + 3p

b.     Qd = 1270 – 10p                                     Qs = 1000 + 20p

c.     Qd = 100 – p/4                                        Qs = 40 + p/4

d.     Qd = 6000 – p/5                                      Qs = 4000 + 4p/5

e.     Qd = 10,000 – 100p                               Qs = 100p

Answer 1

Q. A medical study reports that eating chicken reduces the likelihood of suffering from particular types of heart problems.

The demand for chicken will increases

Q.Average household income increases.

Demand for chicken increases

Q.A widespread disease leading to an increase in the price of beef

Demand for chicken increases

Because price of its substitute increases

Q.Wages for farm labor in cocoa-growing regions rises.

Supply will decrease because cost of production increases

Q.Farmers in various parts of the world see profits being earned by cocoa farmers and choose to enter this industry.

Supply will increases because there are more producers now in market

Q. A dramatic rise in the world price of coffee beans. Assume that farmers growing cocoa beans can easily grow coffee bean instead.

Supply will decrease because farmer shifted to produce cocoa beans now so number of producers decreases

Q.