Question

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 comes out with a new “self-warming” shaving cream.

(d) Wildfires spread across the Palouse wheat fields

e) Apple market after Samsung introduces new features for their phone.

Answer 1

A. If we assume that demand for jelly rises in summers (as it can be used in various desserts and ice-creams), we can expect a rightward shift in the demand curve. This will increase both the equilibrium price and equilibrium quantity.

B. Sale of milk will attract customers and it will increase the demand for the milk. We can expect a rightward shift in the demand curve. This will increase both the equilibrium price and equilibrium quantity.

C. New self-warming cream can attract customers and it will increase the demand for the shaving cream as quick burst of warmth can help in open pores and can reduce razor burn. We can expect a rightward shift in the demand curve. This will increase both the equilibrium price and equilibrium quantity.

D. Wildfire will destroy the wheat fields. This will reduce the supply of wheat in the market.We can expect a leftward shift in the supply curve. This will increase the equilibrium price and will reduce the equilibrium quantity.

E. Due to new features in Samsung phone, people will like to buy more of Samsung phones. Since Apple and Samsung are substitutes, demand for Apple phones will reduce. We can expect a leftward shift in the demand curve. This will decrease both the equilibrium price and equilibrium quantity.