Question

In: Economics

Carefully explain what is happening in the market. Indicate the impact if any on demand, supply,...

Carefully explain what is happening in the market. Indicate the impact if any on demand, supply, price and quantity:

a) Fears of mercury poisoning lead locals to shun fish caught in nearby rivers

Impact on demand

Impact on supply

Impact on price

Impact on quantity

b) In the market for milk, increases in the price of Christmas trees cause trees to be planted on land previously used by dairy farmers.

Impact on demand

Impact on supply

Impact on price

Impact on quantity

c) In the market for shrimp, the price of chicken falls and consumers buy more chicken and less shrimp.

Impact on demand

Impact on supply

Impact on price

Impact on quantity

d) A decrease in input prices as well as a simultaneous decrease in the price of a good that is a complement in consumption.

Impact on demand

Impact on supply

Impact on price

Impact on quantity

Answers to be used:-

Shift inwards / to left

Shift outwards / to right

Increase towards equilibrium

Increase equilibrium price

Decrease equilibrium quantity

Decrease towards equilibrium

Excess demand

Excess Supply

Change in quantity uncertain

Increase equilibrium quantity

No impact

Change in price uncertain

Solutions

Expert Solution

(a) Fear of poisoning will decrease the demand for fish.

Impact on demand - Shift inwards

Impact on supply - No impact

Impact on price - Decrease in equilibrium price

Impact on quantity - Decrease in equilibrium quantity

(b) More planting on land decreases cow grazing, lowering supply of milk.

Impact on demand - No impact

Impact on supply - Shift inwards

Impact on price - Increase in equilibrium price

Impact on quantity - Decrease in equilibrium quantity

Impact on demand - Shift inwards

Impact on supply - No impact

Impact on price - Decrease in equilibrium price

Impact on quantity - Decrease in equilibrium quantity

(d) Decrease in input prices will increase supply. Decrease in price of complement will increase demand at the same time.

Impact on demand - Shift outwards

Impact on supply - Shift outwards

Impact on price - Change in price uncertain (since higher demand increases price but higher supply decreases price)

Impact on quantity - Increase in equilibrium quantity

Rahul Sunny answered 1 year ago

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