Question

For each question draw out the shifts in a supply and demand graph. What happens to Demand (as in the demand curve)? Supply? Price? Quantity?

1. Market: Sony Playstation (gaming console)

Events: a) Technological advances in Xbox production; b) Study reveals gaming leads to poor health

2. Market: Fast Food

Events: a) Public becomes concerned about high sodium and cholesterol; b) wages paid to fast food employees rise

3. Market: Bicycles

Events: a) Public becomes more concerned about physical fitness; b) More publicity about the dangers of bicycle-car accidents

Answer 1

1)

a) Technological advances in producing Xbox will reduce its operating cost and help producers in reducing its price. Consumers will consume more of Xbox and less of play station which will shift demand curve of play station to its left which shift ita demand curve to its left.

b) People will proactively reduce their gaming hours for betterment of their health which will also reduce demand of Sony playstation and shift demand curve to its left from D to D1.

2)

a) As public is concerned about high sodium and cholestrol, they will eat less of the fast food which shift demand curve of fast food to its left from D to D1.

b) Wages paid to fast food employees rises which will raise cost of operating a fast food store and induce owners to sell less of fast food items such that it shift supply curve of gast food to its left from S to S1.

3

a) As people are more concerned about their health, they will buy more bicycle which will raise its demand and shift demand curve to its right from D to D1.

b) More publicity about bicycle car accidents will reduce demand of bicycle and shift its demand curve to its left from D to D1.