l>EC 200 Practice problems - Supply and Demand

If the good is storable, and an increase in price is expected, consumers will desire to buy the great today, prior to the price increases. As a result, the current demand for the great increases, which results in boost in the price the the great today. Check out graph.

2. The drought in the level states has made grain, and therefore feed, rather expensive. Many ranchers cannot afford come feed their cattle, and have sold lot of their herd for slaughter. A. What will certainly be the immediate effect of this occasion on the equilibrium price and also quantity of beef? show using a supply and demand diagram. Slaughtering the cows will an outcome in boost in the it is provided of beef come the market, which will consequently lead to a diminish in the equilibrium price that beef and boost in the equilibrium amount of beef. Watch graph.

market for beef

b. Chicken and also beef are substitute goods. Illustrate the result that the slaughter that the cattle herds will have actually on the equilibrium price and also quantity that chicken. as the price of beef decreases, consumers will certainly buy much more beef and less chicken. The need for chicken will decrease, leading to a decrease in the equilibrium price and also quantity the chicken. Watch graph.

sector for chicken c. Together it happens, the slaughter that beef livestock has corresponded with a decrease in consumers" income. Assuming that steak is a normal great while hamburgers are an worse good, use a supply-and-demand diagram because that either sector to illustrate the combined effect that the two previously mentioned events ~ above the equilibrium price and quantity the hamburgers and also steak. together consumers" earnings decreases, the need for normal goods (such together steak) decreases when the demand for inferior items (such together hamburgers) increases. Keep in mind the our conclusion from part a is quiet valid. A lower price that beef will rise the supply of all products in i beg your pardon beef is an input. As such in each of the two industries in concern we deal with simultaneous shifts in supply and demand.

Steak: S increases, D decreases.

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Hamburgers: S increases, D increases.
The price of steak will decrease. Us cannot speak for sure what will take place to quantity, since that will count on the loved one magnitude that the two shifts. The equilibrium quantity of hamburgers marketed will increase. We cannot speak for certain what will happen to the equilibrium price the a hamburger, since that will count on the family member magnitude that the two shifts.

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3. Assume that the sectors for street cane, rum, and also whiskey are at first in equilibrium. Assume more that Hurricane Marilyn destroys much of the Jamaican sugar cane crop. Sugar cane is a primary ingredient in rum, however it is no an ingredient in whiskey. Analyze the impact of the hurricane ~ above the industries for each of the three goods. Describe using graphs.

Step One - The industry for sugar cane The Hurricane results in a decrease in it is provided (at any type of given price, sellers are no longer able to provide as lot cane as they supplied to). As a result, the equilibrium price of sugar cane will certainly increase, and the equilibrium amount will decrease. See graph.

Market because that sugar cane

Step 2 - The market for rum sugar cane is a principal ingredient in rum, and it is now much more expensive. Boost in the price the inputs reasons a diminish in supply. Together a result, the equilibrium price of rum will certainly increase, and the equilibrium quantity will decrease. The graph will certainly be comparable to the one above.

Step three - The market for whiskey that is reasonable to assume whiskey and also rum space substitutes. Rum is now an ext expensive 보다 it supplied to it is in (see action Two). Together a result, an ext consumers will certainly buy whiskey instead. This will certainly cause an increase in the demand for whiskey, which leads to higher equilibrium price and also quantity of whiskey. See graph. Market for whiskey