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In: Economics

Assume there is a fish market in your town. What would happen to the market and...

Assume there is a fish market in your town. What would happen to the market and its price & quantity if the following scenario happens. (Sketch DD & SS curves to explain)                  

a)       An enhanced robot selling fish & folks realized chicken prices are cheaper now

.b)      Thunderstorms hit your town & people are getting income bonuses from the government.           

Solutions

Expert Solution

a) chicken is a substitute for fish and if chicken is cheaper now consumers from the fish market will switch to the market for chicken and the demand for fish will decrease. This will shift the demand curve to the left in the market for fish. At the same time there is an improvement in technology of selling fish which will increase the supply and shift the supply curve to the right. The result of these two events combined will result in a reduction in the price at the new equilibrium but it is uncertain if quantity is changed and depends upon the size of the two shifts

b) supply of fish decreases when there is a thunderstorm and the supply curve shift to the left. Income is increased and fish is a normal good which means said the demand for fish will increase. As a result the price in the market for fish is certainly increased but the effect on quantity is not certain

Rahul Sunny answered 1 year ago
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