4. For each of the following markets, indicate whether the stated change causes a shift in...

4. For each of the following markets, indicate whether the stated change causes a shift in demand curve, a shift in supply curve, a movement along demand curve or supply curve. Please, illustrate each answer graphically. Your graph should present only one side of the market, demand or supply. ( 3 points)

a. The tea market. The price of tea decreases.

a. The housing market. Consumers’ incomes fall.

b. The tea market. The price of sugar goes down.

c. The coffee market. There is a freeze in Brazil that severely damages the coffee crop.

d. The fast-food market: The number of fast-food restaurants in an area decreases.

Solutions

Expert Solution

(a) TEA MARKET : As there is decrease in the price of tea , then consumers start buying more of tea and therefore, quantity demanded of tea increases. This is shown by the movement (right and down ) along the demand curve . It is shown in below graph:

(b) HOUSING MARKET: As consumer's income falls , then consumer has less purchasing power to buy houses . Therefore, demand for houses decline, this will shift the demand curve for housing market to the leftward. It is shown in the below figure:

(c) TEA MARKET : As the price of sugar goes down , the the demand for tea increases because tea and sugar are the complementary goods. Therefore, by decraese in the price of sugar, demand curve for tea shifts rightward i.e increases. It is shown in the below figure:

(d) COFFEE MARKET : As there is a freeze in brazil that severely damages the coffee crop. This will decrease the supply of coffee. So, the supply curve for coffee will shift leftward . It is shown in the below figure:

(e) FAST FOOD MARKET: As the number of fast-food retaurants in an area decreases. Then ,it implies that there is decrease in number of sellers who sell fast food , this will decrease the supply of fast food. Hence the supply curve will shift leftward. It is shown in the below figure:

Rahul Sunny answered 1 year ago

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