l>EC 200 Practice problems - Supply and Demand

If the an excellent is storable, and boost in price is expected, consumer will desire to buy the an excellent today, prior to the price increases. Together a result, the existing demand for the great increases, which outcomes in boost in the price that the good today. Watch graph.

2. The dryness in the plain states has actually made grain, and therefore feed, quite expensive. Countless ranchers can not afford come feed your cattle, and also have sold much of your herd because that slaughter. A. What will certainly be the immediate impact of this occasion on the equilibrium price and quantity that beef? highlight using a supply and also demand diagram. Slaughtering the cows will result in rise in the it is provided of beef come the market, i m sorry will in turn lead to a to decrease in the equilibrium price of beef and an increase in the equilibrium amount of beef. Watch graph.

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sector for beef

b. Chicken and beef space substitute goods. Show the effect that the slaughter that the livestock herds will have on the equilibrium price and quantity of chicken. together the price the beef decreases, consumers will buy more beef and also less chicken. The need for chicken will certainly decrease, leading to a to decrease in the equilibrium price and also quantity of chicken. Check out graph.

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sector for chicken c. Together it happens, the slaughter that beef cattle has synchronized with a diminish in consumers" income. Assuming the steak is a normal good while hamburgers are an inferior good, usage a supply-and-demand diagram because that either market to illustrate the an unified effect that the two aforementioned events top top the equilibrium price and quantity that hamburgers and steak. as consumers" income decreases, the demand for normal products (such together steak) decreases if the demand for inferior products (such as hamburgers) increases. Store in mind the our conclusion from component a is tho valid. A lower price that beef will increase the it is provided of all products in i beg your pardon beef is one input. Thus in every of the two industries in question we deal with simultaneous shifts in supply and demand.

Steak: S increases, D decreases.

You are watching: If chicken and beef are substitutes, then a fall in the price of chicken will bring about:

Hamburgers: S increases, D increases.
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The price the steak will decrease. Us cannot say for sure what will take place to quantity, because that will count on the relative magnitude the the 2 shifts. The equilibrium quantity of hamburgers sold will increase. Us cannot speak for certain what will take place to the equilibrium price the a hamburger, due to the fact that that will depend on the family member magnitude of the two shifts.

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3. Assume the the markets for sugar cane, rum, and whiskey are originally in equilibrium. Assume more that Hurricane Marilyn destroys lot of the Jamaican sugar cane crop. Sugar cane is a principal ingredient in rum, however it is no an ingredient in whiskey. Analysis the impact of the hurricane ~ above the markets for each of the three goods. Describe using graphs.


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

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Market for sugar cane

Step two - The market for rum street cane is a primary ingredient in rum, and it is now much more expensive. Rise in the price that inputs reasons a diminish in supply. Together a result, the equilibrium price of rum will certainly increase, and the equilibrium amount will decrease. The graph will be comparable to the one above.

Step three - The industry for whiskey that is reasonable to i think whiskey and rum room substitutes. Rum is now more expensive 보다 it offered to it is in (see step Two). Together a result, much more consumers will certainly buy whiskey instead. This will certainly cause boost in the need for whiskey, which leads to greater equilibrium price and also quantity of whiskey. Watch graph. Sector for whiskey