Question

In: Economics

Using the supply and demand diagram for a product of your choice (identify ), anticipate the...

Using the supply and demand diagram for a product of your choice (identify ), anticipate the change in market price and quantity for a product of each of the development below. Explain

  1. Consumer incomes rise
  2. The price of competing products falls
  3. The minimum wage is raised substantially
  4. Rent control is eliminated in a city.

Solutions

Expert Solution

Suppose our product is Tea .

a) when consumer increase , people will demand more of tea hence demand curve for tea shfit to the right, as a result, the market price and quantity for a product increase .

b) The price of competing product falls for example coffee.. when the price of coffee falls, people will demand more coffee and demand less of tea due to high price of tea . as a result the demand curve for tea shift to left and as a result , the market price and quantity falls .

c) When the minimumw wage is raised substantially, then the cost of producing tea increase which result in decrease in supply as a result supply curve shifts to the left which cause to increase the market price and falls in quantity demanded.

d) When rent control is eliminated in a city, then rent may increase to the equilbruim wage which decrease the vaccant of new people and hence population will decrease .therfore the demand for tea decrease as a result the price of tea decrease and quantity demanded falls.

Rahul Sunny answered 2 years ago
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