Question

As you answer these short FRQ's below, be direct and to the point. Provide a graph if asked and any details that explain why something is happening

1. Normally, whenever a new video game console comes out, there is a shortage all over the United States. Graphically illustrate and fully explain where the shortage comes from, how the various roles of prices can come together to end the shortage, and why the final outcome is not necessarily the fairest outcome.
2. In the winter of 2006–2007, unusually cold weather prevented people from enjoying the great outdoors. This led to a huge surplus of snowmobiles all over Minnesota. Fully explain how the surplus came about, how the "invisible hand" dealt with this surplus and provide a graph to illustrate your explanation.
3. Draw a graph illustrating what would happen in the market for log cabins if consumer income increased by 19% in Montana.
4. Draw a graph showing what would happen in the market for cat food if it were discovered that many brands of canned cat food, contained poison.

Here are the questions to help you analyze a change in supply:

• What determinant or determinants of supply has/have changed or will change, and in what direction?
• What was, or will be, the impact on the supply of the good or service?
• What was, or will be, the impact on the price of the good or service?
• What was, or will be, the impact on the quantity of the good or service demanded?

Answer 1

1) here the demand will be more than supply so the invisible hand will push the price up due to excess demand and will stabilise the market.

2) in this case the impact will be that the lack of demand will lead to excess supply in the market and the invisible hand will pull the market price down to clear the market.

3) in this case the demand curve will shift outward showing a increase in the demand as income increases. here the invisible hand will push the market price up and then the market will be clear at a new equilibrium point.

4) in this case the demand curve will shift backward and there will be excess supply so the market price will come down to clear the market.