Question

Graph the following markets and label what happens to Demand, Supply, Price, and Quantity of goods A,B, and C.

a. California will cut the amount of fishing license by 30% that it will issue this year in order to increase the amound of fish in its lakes and streams. Graph the effect of this policy on fishing license (good A), and the market for fishing tackle (goods B) in California. Label the relationship of goods A and B.

b. How does this change in the market for fishing licences in california affect the market for fishing licences in Oregon (good C)? what is the label for relationship of goods A and C?

Answer 1

a. As less fishing licenses would be issued this year according to the policy on fishing, the supply curve for licenses would shift inwards to the left. The demand remaining the same, the price of licenses would increase and the number of licenses in the market would decrease.

As less people now have fishing licenses, so the demand for fishing tackle would fall because there are only few in the market with the license. The demand curve would shift inwards to the left. The price and the quantity both would fall.

Both the goods, A & B are complementary to each other. When the number of license holders in the market increases, the demand for fishing tackle would increase automatically.

b. Since less people are granted license for fishing in California, so those who don't have a license would now move to other place like Oregon for fishing. The demand for licenses in Oregon would increase and th demand curve would shift to the right, the price and the quantity both would increase.

The two goods, A & C are substitutes of each other.