Question

In: Economics

A) A drought kills off some potato crops. Use a supply and demand graph, provide a...

A) A drought kills off some potato crops. Use a supply and demand graph, provide a brief explanation and indicate what happens to the following: -The market for potatoes. -The market for French fries. -The market for ketchup. -The market for rice. B) Explain the difference between a change in demand and a change in quantity demanded. Use two of the examples from part A to illustrate the difference. C) The government is considering imposing a new law to improve health that French fries have to be sold for at least $4. (this question is unrelated to part A) -In order to be binding would this be a ceiling or floor? -Use a supply and demand graph to explain the impact of this policy. Use both positive and normative analysis and describe the pros and cons of the policy.

Solutions

Expert Solution

(A)

In each graph, D0 and S0 are initial demand and supply curves intersecting at point A with initial price P0 and quantity Q0.

(1) Market for potatoes:

A destruction of crop will lower the market supply of potatoes, shifting its supply curve leftward to S1, intersecting D0 at point B with higher price P1 and lower quantity Q1.

(2) Market for french fries:

An increase in price for potatoes, an input to french fry production, will increase input price, which will cause the sellers to lower production. This will lower the market supply of french fries, shifting its supply curve leftward to S1, intersecting D0 at point B with higher price P1 and lower quantity Q1.

(3) Market for ketchup:

French fries and ketchup being complements in consumption, an increase in price of french fries will decrease the demand for ketchup, shifting its demand curve leftward to D1, intersecting S0 at point B with lower price P1 and lower quantity Q1.

(4) Market for rice:

Rice and potatoes being substitutes in consumption, an increase in price of potatoes will increase the demand for rice, shifting its demand curve rightward to D1, intersecting S0 at point B with higher price P1 and higher quantity Q1.

NOTE: As per Answering Policy, 1st question is answered.

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

Extensions of Demand and Supply Analysis Graph the accompanying demand data, and then use the midpoint...
Extensions of Demand and Supply Analysis Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand for each of the four possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a nontechnical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment. Calculate total-revenue data from the demand schedule...
Extensions of Demand and Supply Analysis Graph the accompanying demand data, and then use the midpoint...
Extensions of Demand and Supply Analysis Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand for each of the four possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a nontechnical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment. product price Quantitiy Demanded $5 1 4...
If there is a recession, use a supply and demand graph to explain what the Classicalists...
If there is a recession, use a supply and demand graph to explain what the Classicalists would argue will happen to get the economy to long run equilibrium. Be sure to label your graph, show changes, and explain what is happening.
For the scenarios discussed below, use supply and demand curves and a graph to analyze what...
For the scenarios discussed below, use supply and demand curves and a graph to analyze what will happen to both price and quantity in equilibrium given the information available below 1.You are the CEO of Coca-cola. The FDA introduces a $2 per meal tax on fast-food (but not on drinks). Analyze the market for your products. It is the fast food sellers who are obliged to pay the tax to the state. 2. You are the CEO of Coca-cola. The...
Supply and Demand (15 pts) For each scenario, explain in words or use a graph (if...
Supply and Demand (15 pts) For each scenario, explain in words or use a graph (if you choose to use a graph, it must be completely labeled [ie - Q1, Q2, D1, D2, etc] ) to show how the demand and/or supply curve would shift and/or move along their respective curve. Make sure to clarify which market you are using. (a) Jelly market during the month of June. (b) Milk goes on sale in the weekly grocery ad. c) Gillette...
For the scenarios discussed below, use supply and demand curves and a graph to analyze what...
For the scenarios discussed below, use supply and demand curves and a graph to analyze what will happen to both price and quantity in equilibrium given the information available below. Graphs MUST be half a page each. When it is impossible to pin down the direction of the effect, discuss what is more likely in your opinion and why. Make sure to differentiate between movements of curves and movements on curves. For example, you could say something like this: “the...
Draw a supply and demand graph of the following scenarios. Use these graphs to answer what...
Draw a supply and demand graph of the following scenarios. Use these graphs to answer what happens to price and quantity? (Does is increase or decrease?) Must show graphs and answer what happens to price and quantity. a. (5 points) Cheese Market: Suppose that a technological advancement substantially reduces the cost of producing cheese, while a new study suggests that excessive use of cheese is harmful to a person’s health. b. (5 points) Cream Market: Peaches and cream are complements....
Draw a supply and demand graph for gasoline. Consider whether supply or demand for gasoline is...
Draw a supply and demand graph for gasoline. Consider whether supply or demand for gasoline is more inelastic, and draw the curves accordingly. Label the original equilibrium price $3. In California, the federal, state and local excise and sales taxes total about 77 cents per gallon. Assuming the government taxes the seller directly, draw the impact of this tax on the supply and demand diagram. Label the new price the consumer pays (Pc), the price the seller receives after taxes...
Using the principles of supply and demand, sketch an appropriate supply and demand graph, labeling all...
Using the principles of supply and demand, sketch an appropriate supply and demand graph, labeling all the lines, and use it to tell me why increasing the money supply causes interest rates to fall.
Use a well-labeled basic supply and demand graph below to illustrate the market for cheese in...
Use a well-labeled basic supply and demand graph below to illustrate the market for cheese in California with and without free trade. Please assume that the world price of cheese is below the domestic equilibrium price so we know California will import cheese. On your graph, indicate the quantities of cheese produced in California with and without trade. Also label the quantities of cheese consumed in California with and without trade and the pounds of cheese imported to Californi Label...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT