Question

In: Economics

Use either a shift in demand of supply to GRAPHICALLY represent each of the following situations....

Use either a shift in demand of supply to GRAPHICALLY represent each of the following situations. Also, label the graphs correctly and indicate the changes in equilibrium in each case.

Beef market: Increases in the cost of cattle feed.
Air travel market: Reduced number of travelers due to Covid-19 pandemic.
SUV market: Reduced gasoline prices.
Smartphone market: Technology improvements reduced the cost of manufacturing smartphones.

Four separate graphs please.

Solutions

Expert Solution

(a) Beef Market:

Situation: Increase in cost of cattle feed,

An increase in cost of cattle feed will increase the cost of supplying beef. As a result, the supply curve of beef will shift to the left.

As the supply curve shifts to the left from "supply" to "supply new"

The equilibrium point moves from E1 to E2

The equilibrium pirce of beef increase from P1 to P2

The equilibrium quantity of beef decrease from Q1 to Q2.

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(b) Air travel market:

Situation: Reduced number of travelers due to Covid-19 pandemic.

Decrease in the number of travelers due to Covid-19 pandemic, the demand for air travel will decrease. As a result, the demand curve for air travel will shift to the left.

As the demand curve shifts left from "demand" to "demand (new)"

The equilibrium point moves from point E1 to E2

The equilibrium price of air travel ticket decrease from P1 to P2

The equilibrium quantity of air travel tickets decrease from Q1 to Q2.

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(c)

SUV market:

Situation: reduced gasoline price.

Gasoline and SUV are complementary goods. A decrease in gasoline price will increase the demand for SUV. As a result, the demand curve for gasoline will shift to the right.

As the demand curve shifts right from "demand" to "demand (new)"

The equilibrium point moves from point E1 to E2

The equilibrium price of SUV increases from P1 to P2

The equilibrium quantity of aSUV increase from Q1 to Q2.

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(d) Smartphone markets:

Situation: Technology improvements reduced the cost of manufacturing smartphones.

Technology improvements reduced the cost of manufacturing smartphones, as a result the production of smartphones at each price level rise, which shifts the supply curve for smartphones to the right.

As the supply curve for smartphones shifts right from "Supply" to "Supply new"

The equilibriium point moves from E1 to E2.

The equilirium price of smartphones decrease from P1 to P2

The equilibrium quantity of smartphones increase from Q1 to Q2.

Rahul Sunny answered 1 year ago

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